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Business News/ Markets / Commodities/  Diwali 2023: Gold to glitter, base metals may struggle in Samvat 2080, says Jigar Trivedi of Reliance Securities
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Diwali 2023: Gold to glitter, base metals may struggle in Samvat 2080, says Jigar Trivedi of Reliance Securities

In the commodities market, Jigar Trivedi believes the fundamentals for precious metals like gold and silver are positive, while demand concerns may loom over base metals.

Jigar Trivedi, Senior Research Analyst - Currencies & Commodities, Reliance SecuritiesPremium
Jigar Trivedi, Senior Research Analyst - Currencies & Commodities, Reliance Securities

Samvat 2080: Gold prices are expected to rally further while silver may continue its outperformance over the yellow metal in the new Samvat year 2080, said Jigar Trivedi, Senior Research Analyst - Currencies & Commodities, Reliance Securities. In the commodities market, Trivedi believes the fundamentals for precious metals like gold and silver are positive, while demand concerns may loom over base metals.

Edited Excerpts:

1) Gold prices have given over 20% returns since last Diwali. Do you think the correction is overdue or the bullion will continue to march ahead?

The fundamental background is supportive for another strong rally in the yellow metal. The uncertainty related to the geopolitical risk / war premium or the US elections is likely to be a major catalyst for an uptrend. Moreover the central bank buying is also a key trigger. We may see another rate hike by the US Fed, but next year H1 at least, the rates will stay higher and the dollar may weaken in the first half of the next year. Hence the outlook is positive. Having said that, we don't deny the possibility of a minor correction but that would be an opportunity to go long.

2) Indian buyers seem to be reluctant to buy physical gold at a high price. What is your assessment of the current scenario?

Of course, the prices are high in India and footfall in the jewellery shops has gone down as compared to the same time last year. We shall see last minute festival time rise in demand but amid such high prices, buyers are reluctant to buy aggressively.

Also Read: Diwali 2023: What is ‘samvat’ and why does it hold significance for stock market investors?

3) Silver prices have outperformed the yellow metal. Do you see this outperformance to continue amid rising industrial demand?

Exactly, the major positive for silver is rise in the industrial demand. The use in 5G technology, green energy and Electric Vehicles (EV) is likely to drive the market up. Nonetheless, China is clearly struggling with an economic downturn, we expect the recovery in the manufacturing activity somewhere in H2 of next year. Not to mention, political uncertainty, weak dollar, buoyant atmosphere in the bullion space, all will provide a push to silver. We are of the opinion that silver may outperform next year too.

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4) Digital gold investment avenues like Gold Exchange Traded Funds (ETFs) and Sovereign Gold Bonds (SGBs) are seeing growing acceptance. This brings us to a golden debate - what is the best investment option - SGB, ETF or physical gold?

SGB, as it provides better tax efficiency, earns interest and has no maintenance cost. One can start with the smallest unit. Of course there is no upper limit in the ETF way but SGB is still the best option.

5) There is a race among global central banks to accumulate gold, the latest statistics from World Gold Council confirms the trend. What are your views on this and how do you interpret this trend? Can you throw a light on the pros and cons of the central bank accumulating gold?

Yes, correct. Central banks have bought a net 800 tonnes of gold YTD, the highest on record for that nine-month period. The reason behind it is, uncertainty related to rate cycle and geopolitical risk. It's been more than 18 months since the Russia and Ukraine war and now we are witnessing a war between Israel and Palestine. To safeguard against rising global uncertainty, the central banks’ of developing countries have chosen to keep buying the gold. We believe the trend will continue among central bankers. We also believe that this may push prices even higher in coming sessions.

Also Read: Diwali 2023: Where do experts see gold prices in Samvat 2080?

6) Given the global geopolitical uncertainty, crude oil prices have remained highly volatile. How do you assess the situation going ahead and what is your outlook on oil prices?

Crude oil fundamentals are different from the fundamentals of the other commodities. The OPEC - Russia cartel is closely monitoring the war situation which is going on. Very recently when WTI touched $95 / barrel, Saudi Arabia announced it may release more crude in the market if the war escalates and oil supply is hampered. 

On the other side, the cartel is working to keep prices stable around $80/barrel. And when oil drops to levels even below $70/barrel, they would reduce supply and prices will shoot up. So the game is in the hands of a few players like US, Saudi Arabia and Russia. Going forward how the war situation is taking shape, will be very important for oil market.

Also Read: Diwali 2023: How should you trade stocks, gold, commodities during special Muhurat session?

On the other hand China is struggling with ongoing real estate downfall and Germany is already in the recession. The US has avoided the recession but the economic slowdown is felt there too. Unless and until these advanced countries’ manufacturing PMI does not take a U-shape recovery, oil may stay below $90/barrel. Broadly next year it should stay in the range from $65-95/barrel.

7) Concerns over recessions in the developed economies still loom, though the US is managing its economy’s soft landing. Most commodities, such as industrial metals, take cues from global demand and supply factors. What is your outlook on these metals?

Very true. As mentioned earlier, countries like China, UK and Germany are feeling the heat of a weakening economy. The US is heading into the election year. Russia, Israel and Iran are playing a dangerous game of war. The world is at a crucial juncture. Rate cycles may have peaked and the greenback too looks to weaken now. The manufacturing PMI and consumer confidence is not giving a pleasant picture. 

Amid all this, the strict demand for base metals looks a challenging task. Metals like copper aluminium and zinc may experience a temporary uptrend if China injects liquidity into the system but needs a long term structural recovery for long term bullish call in the industrial metals.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Updated: 11 Nov 2023, 06:43 AM IST
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