Motilal Oswal says that Gold’s volatility in CY2021 until now has been no less than any ride in an amusement park. After a good rally last year, we witnessed some profit booking and consolidation at lower levels amidst the US Presidential election uncertainty, vaccine reports from various pharma companies and volatility in dollar and yields. Although, with all these uncertainties, precious metal packs were backed by strong fundamentals which kept the hopes high for all bulls

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Talking about the pandemic and bullions fundamentals, it is hard to forget the supply and demand dynamics that have been changing due to the measures the government announced in these times. The year 2020 started with prices at peak as there was ample demand and not sufficient supply. Physical market was hit, amidst the pandemic, stores were shut and market participants could not go out and buy or recycle their gold. On other hand, with less gold recycling and mines taking a hit, overall supply was in question, says Motilal Oswal.

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In 2021, pandemic struck again and a lot of economies announced stricter restrictions that led to safe haven buying in the precious metal pack. COVID cases are still on the rise in India and pandemic fears still hover the market, but the situation is a bit different from last year. A complete lockdown is not yet announced pan India, there are a few restrictions, but the demand supply dynamics are different from the previous year. Also, import duty cut was declared earlier this year in the Union Budget announced by the Government of India, which also weighed on the prices and encouraged jewellers to import more. Strong fundamentals are helping gold gain momentum and are justifying our bullish stance that we have been maintaining for more than a year, explains Motilal Oswal.

Akshaya tritiya aka Akha Teej, an annual springtime festival of the Hindus and Jain is approaching this week. Gold’s demand increases more during these festivals and looking at the import numbers, the same is expected this time. Gold prices have increased during this festival; there are only fewer cases where the prices have consolidated or traded sideways. Going with the historical trend, and the current fundamental and technical set up, the prices could maintain the upside momentum.

Is it a good time to buy gold?

There are factors that the market participants are watching cautiously like falling Dollar, higher US treasury Yields, ETF demand picking up and falling global interest rates. Although, Central Banks have continued to maintain a dovish stance, interest rates are near the lows. Now that Central Banks have started to buy again we expect that higher numbers in the future are likely to keep prices elevated. Rising Coronavirus cases, continuous liquidity injections, rising inflationary expectations, economies growing on the back of debt, Middle east tensions, trade war between US and China and few other factors continue to boost the sentiment and build a strong case for higher gold prices.

Motilal Oswal suggests buying in Gold for a short to medium perspective targeting new life time highs towards $2050 followed by $2200. On the domestic front, the post budget price correction is a good level to enter once again for an immediate target towards Rs 50000 and eventually hitting new highs of Rs 56500 and above over the next 12-15 months.