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Home >Markets >Commodities >Gold prices down 10,000 from August highs. Should you start buying now?

Gold prices today dipped below the 46,000 levels in futures market as the selloff extended to the sixth day. On MCX, gold traded at 45976, down 0.33%, as global rates also softened amid rising US bond yields. Gold rates in India are down about 8% or 4,000 per 10 gram so far this year after a more than 25% jump in 2020. As compared to August highs of 56,200, gold is now down more than 10,000 from peak levels.

"Gold prices have slipped below the crucial 46,000/10gm level, to hit an 8-month low. The rise in the US Treasury yield and stronger dollar, optimism of a larger economic stimulus package, and the vaccination drive have led to downside pressure on gold prices," says Nish Bhatt, Founder & CEO, Millwood Kane International.

Higher yields increase the opportunity cost of holding bullion, which pays no interest.

"The rising treasury yield is indicative of a recovery in the US economy. The yellow metal has also lost investor's interest as the vaccination drive picks up pace and new cases decline in some parts of the world. Gold prices in India have lost over 10,000/10gm or 18% from its highs witnessed in August 2020. Going forward risk of a second wave of cases, easy liquidity, global economic recovery will guide gold prices," he says.

Is this the right time to buy gold?

"Gold is considered a safe haven, the rally in the year 2020 was primarily due to the pandemic and the uncertainty it created. Gold prices started falling on the news of a vaccine. The rise in Treasury yield indicative of an economic recovery in the US has put further pressure on the yellow metal. We expect further downside in prices of gold as the global economic recovery picks up pace. Global funds will chase assets bearing higher yields. Investors should have gold in their portfolio, 5-15% depending on their risk appetite," said Nish Bhatt.

Kshitij Purohit, Lead Commodities & Currency at CapitalVia Global Research Limited, says: "Gold price is trading near 46000, near the 50% Fibonacci retracement levels and at this price investors may see value. Technically, Gold is weak on daily charts and prices are trading below support of 200 days SMA which is at 48900. Here at level of 46,000 I have no surprise if value-seeking investor start investing and bottom-pickers start to show up to prevent a steeper price slide. The short-term trend is down according to the daily chart. Long-term investor can buy gold in the range of 45600–45800 with the strong support stop-loss of 44500."

In a note Kotak Securities said: "Stimulus measures are likely to continue to boost economic growth. US President Biden tweeted that he want to go big on COVID-19 relief package. Also rising price pressure may increase gold’s appeal as an inflation hedge. Gold has fallen sharply and the momentum looks weak. However we believe that the sell-off is overstretched given the US stimulus expectations and loose monetary policy stance hence fresh shorts should be avoided."

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