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    Gold at record high! Recession fears can send it soaring higher

    Synopsis

    Investors can buy on decline around Rs 46,100 or on breakout above Rs 47,330 in gold.

    Manoj Kumar Jain

    Director, Head - Commodity & Currency Research, Prithvi Finmart

    Globally, gold prices tested crucial resistance of $1,772 per troy ounce on Monday even as prices back home hit record highs of Rs 47,980 per 10 gram. Fears of global recession and major contraction in global GDP due to Covid-19 are supporting safe-haven buying in gold. The yellow metal has gained around 15% so far this year in international markets and 20% in the domestic markets.

    Rally in gold prices was visible after coronavirus took the world in its grip and lockdowns were imposed, first in China in December 2019 and then across the entire world by April 2020.

    Global equity markets collapsed in the first quarter of the year and major research agencies predicted negative global growth due to the pandemic. Safe-haven buying emerged in gold while QE announcements by major developed and developing nations to support their economies also boosted the demand. Interest rates were slashed by major global central banks and the US Federal Reserve cut interest rates to zero percent.

    Since global growth remains subdued due to Covid-19, gold is one of the most favoured choices for global investors. We expect gold prices to remain firm in longer-term and any decline in the prices will be an opportunity to accumulate the yellow metal.

    TECHNICAL VIEW
    Gold is in a long-term uptrend since August 2018. From the lows of $1,161 per troy ounce, gold tested highs of $1,788 per troy ounce in the international market during April. At MCX, gold prices started rising from August 2018. The prices have moved from the lows of Rs 29,268 per 10 gram to record high of Rs 47,980 per 10 gram in the month of May 2020.

    GOLD SNIP 1Agencies

    Gold prices are currently near September 2012 breakout of $1,771 per troy ounce in international markets. If it crosses $1,771 per troy ounce on a monthly closing basis on the technical chart, then fresh rally can be observed in gold till $1,820-1,850 level. It will show weakness only when it gives a close below $1,692 per troy ounce.

    At MCX, if it gives close above Rs 47,330 per 10 gram on the monthly chart, then a fresh rally will begin in gold and prices can touch a high of as much as Rs 4,8000-48,500 levels in the coming months. It will show weakness only when it closes below Rs 45,800 per 10 gram.

    Investors can buy on decline around Rs 46,100 or on breakout above Rs 47,330 in gold with strict stop loss below Rs 45,500 on a closing basis for the target of Rs 48,000-48,500 levels.

    (The author is Director, Head commodity & Currency Research, Prithvi Finmart. Views in the above report are the author’s personal views and need not guarantee any kind of profits. Investor shall consult with their financial advisor before investing in commodities. Investments in commodity market are subject to market risk.)



    (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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