Gold price: Experts give ‘investor’s haven’ tag to yellow metal. Should you buy?

Gold price yesterday hit ₹48,000 levels and finally closed at ₹47,760 per 10 gm levels — logging intraday gain of ₹165 at the Multi Commodity Exchange (MCX). According to commodity experts, primary reason for the gold price rally is weakness in the US Dollar (USD) against major global currencies. They said that the US Dollar in the last one month has gone down by near 3 per cent while in the last one week the greenback has corrected to the tune of 0.80 per cent. They went on to add that yellow metal price rise is expected to continue in immediate short-term as the precious metal may once again emerge as an ‘investor’s haven.’

Speaking on the triggers aiding gold price rally Amit Sajeja, Vice President — Research at Motilal OSwal said, “Primary reason for gold price rally is weakness in the US Dollar. In the last one week, the American currency has fallen around 0.80 per cent while in the last one month the US Dollar has crashed around 3 per cent against the major global currencies.” Sajeja said that one more trigger that helped yellow metal rate rise further is weak US economic data. He said that due to this weak US economic data, weakness in dollar is expected to continue and hence gold may emerge as an ‘investor’s haven’ in the immediate short-term.

Standing in sync with Amit Sajeja’s views; Anuj Gupta, Vice President — Commodity & Currency Trade at IIFL Securities said, “Weakness in the US Dollar is expected to continue as talks of sluggish economic growth and requirement for the stimulus package are around. Recently, the US bond yield has also gone down and Dow and Nasdaq too is under pressure as the equity indices are trading near to its lifetime high. So, investors are expected to move towards gold once again as the global central banks have already increased their gold holdings by around 250 tons. This may act as trigger for institutions to move towards gold fishing out money from the equity and bond market.”

Asked about the gold price outlook Anuj Gupta of IIFL Securities said, “If the weakness in US Dollar continues, then gold price in the international market may hit $1,860 to $1,880 per ounce while at MCX the precious metal may hit ₹49,500 to ₹50,000 per 10 gm mark in the next one month.”

Gupta said that gold price has strong support at $1,800 to $1,805 per ounce levels in the international market while in the domestic market the yellow metal is standing at immediate support of ₹46,800 levels. Gupta said that there is around ₹1500 to ₹1800 per 10 gm difference in the landing retail gold price and the gold price at MCX. He said that retail gold price would be ₹1500 to ₹1800 higher than the gold price appearing on the MCX screen.