Gold and silver had logged annual gain of about 25% and 50% in 2020
Lower interest rates and dollar's downtrend could support gold at lower levels, say analysts
Gold and silver edged higher on the first day of the New Year though gains were moderate. On MCX, gold futures were up 0.09% to ₹50,198 per 10 gram while silver edged 0.14% higher to ₹68,200. In Indian markets, both gold and silver had logged strong annual gain for the year 2020, rising 27% and about 50%, in tandem with a rally in global prices.
In global markets, gold prices finished 25% higher for the year in 2020, logging its biggest annual gain in a decade amid unprecedented wave of stimulus by central banks and governments and the dollar’s decline. Gold added 0.2% to settle at $1,898.36 an ounce on Thursday.
Though prices have corrected significantly from record highs hit in August amid rollout of covid vaccines, the dollar’s continued weakness had helped support gold into the year-end.
Among other precious metals, spot silver logged annual gain of 48% amid optimism about industrial demand, while palladium had a fifth consecutive annual gain, with a rise of about 26% in 2020. Platinum climbed 11% for the year.
“Gold has been on a rise for the last few years and the rally exacerbated this year owing to COVID-19. Gold surged to a record high level of near $2080/ounce in August 2020. However it witnessed a correction of about 15% reaching a low of near $1770/ounce in late November, before recovering back to currently traded $1880/ounce. The recent sell-off has been mainly due to profit taking amid hopes of a COVID -19 vaccine and year-end position squaring," said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.
Although the recent correction has slightly dented market sentiment, he said, the overall outlook for gold is still upbeat. "Escalating virus situation is proving to be a challenge for the global economic recovery. Apart from this lower interest rates worldwide and US dollar's downtrend might prove positive for the yellow metal. Currently gold spot is flirting near $1900/ounce. A sustained break might be seen in 2021 which might push the prices to $1980/ounce and then $2050/ounce," he added.
On the other hand, Morgan Stanley sees gold and other precious metals coming under pressure as financial markets normalize and longer maturity bond yields rise.
In India, the latest issue of sovereign gold bonds closes for subscription today. The issue price for Sovereign Gold Bond Scheme 2020-21 - Series IX has been fixed at ₹5,000 per gram of gold. A discount of ₹50 per gram on the nominal value is available to investors applying online and making the payment against the application through digital mode. For such investors, the issue price of gold bond will be ₹4,950 gram of gold.