Gold prices expected to surge to Rs 52000-53000 over next 12 months: Motilal Oswal Financial Services

Bullions have been in a consolidation mode from the last Diwali to this Diwali, and in the past few months, it has been witnessed some choppiness amidst volatility in the US Dollar and bond yields.

For the first half of the year, better-than-expected economic data and hawkish outlook from the US Fed have kept most market participants on the edge, while the second half has been witnessing weaker data set and change in the US Fed approach which could get the gold bulls excited once again.

See Zee Business Live TV Streaming Below:

Despite the rangebound movement seen in the yellow metal, domestic brokerage firm Motilal Oswal remains bullish and continues to maintain a positive bias for gold price over the next 12 months and expects a directional move soon.

The current scenario could have some short-term hiccups which might give investors a better buying opportunity.

“We believe that gold has a potential to surge towards $2000 once again and might even make a new lifetime high on the Comex. On the domestic front we expect prices to surge towards highs of Rs 52000-53000 over the next 12 months,” it said in a note.

Gold being a non-yielding asset has always reacted first in case of any change in the interest rate and hence even now with so much panic in the market regarding tapering, and policy tightening metal prices have held their ground on the back of low rates.

Inflation has been on the rise and exceeded the comfort zones of most central banks which is also supporting the overall safe-haven appeal of Gold interestingly (as a Commodity and also as an inflation hedge).

This along with a host of other tailwinds like growing uncertainties regarding China's Evergrande, Power shortage issue, trade talks between the US-China, rising cases of the Covid-19 and Delta variant, growing debt, and a few others could keep the optimism of the gold bulls high.

In the next US Fed meet there are growing expectations of tapering of the massive bond purchase program which the Fed had initiated in order to safeguard the US economy from a hard landing during the Covid led economic crisis.

Although the market is well prepared for the same, some knee-jerk reactions could likely give the gold bulls another buying opportunity.

Gold underperforms in 2021:

Gold prices have seen a good surge if we look at 2019 and 2020, which were ~52% and ~25%, respectively. However, we witnessed some underperformance in 2021 where prices have been trading between Rs.47,000 and 49,000 mark.

The demand for gold in India has bounced sharply from the lows seen during the pandemic in 2020.

The recent World Gold Council data suggest that for the quarter ended Sep’21 demand for gold jumped to 47 per cent YoY to 139.1 tonnes as compared to 94.6 tonnes in the year ago.

The jewelery demand also has seen a jump of 58 per cent YoY in India during July –Sep 2021 period to 96.2 tonnes due to strong pent-up demand, occasion-related gifts, economic rebound, and lower prices.

ETFs have not been the best supporter for gold since the start of this year, although the Central bank gold buying spree and CFTC positions maintaining their position in net longs have increased the overall sentiment for the gold prices.

Trend For Diwali:

Unlike Diwali 2020, this year there are much less restrictions, shops are open, with the overall demand has also increased in this year which can be seen from the import numbers which stand at ~740 tonnes till September.

Risky assets have seen massive upside and have delivered handsome returns in the last few months, and any change in trend or weakening of the momentum could lead to a massive surge in safe havens - particularly gold.

Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.