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Gold price may jump to a new lifetime high, say experts. Should you buy now?

Gold price: Due to weakness in US Dollar, no sign of increase in interest rates post-Jackson Hole symposium and demand for physical gold due to fast approaching festival season in India, precious metal price may breach its previous lifetime high of  ₹56,191 at MCX, say experts. (PTI)Premium
Gold price: Due to weakness in US Dollar, no sign of increase in interest rates post-Jackson Hole symposium and demand for physical gold due to fast approaching festival season in India, precious metal price may breach its previous lifetime high of 56,191 at MCX, say experts. (PTI)

  • Gold price today is most undervalued among the financial asset categories and it may shot up to its lifetime high by end of 2021, say commodity experts

Gold price yesterday at Multi Commodity Exchange (MCX) slid 0.06 per cent and closed at 47,090 per 10 gm mark. The yellow metal price edged lower for third straight session as Indian National Rupee (INR) continue to gain strength against the US Dollar (USD). However, if we go by commodity experts' views, the bullion metal is most undervalued among the financial asset categories and it may shoot up to its lifetime high by end of 2021. They said that weakness in US dollar, no sign of increase in interest rates post-Jackson Hole symposium and demand for physical gold due to fast approaching festival season in India, the yellow metal may breach its previous lifetime high of 56,191 at MCX. 

Gold price outlook

Speaking on the triggers and levels in regard to gold price; Anuj Gupta, Vice President — commodity & Currency Trade at IIFL Securities said, "Weakness in dollar due to no sign of increase in interest rates as discussed in US Fed's Jackson Hole symposium, geopolitical tension due to Afghanistan crisis is also supportive for gold price rally. We are expecting that gold may trade higher in the last months of the year. The precious bullion metal may test $1950 to $2000 per ounce levels till this year end. US economic data and inflation concern may provide fuel to the upside move in gold price."

Triggers for gold price rally

Sugandha Sachdeva, Vice President — Commodity & Currency Research at Religare Broking Ltd said, "Among the financial asset categories, gold looks quite undervalued. As an interest rate hike in the US is still far away and demand for physical gold is rising due to the approaching festival season in India, gold prices are expected to witness upside momentum after almost a year of correction and consolidation. At the highly anticipated Jackson Hole symposium, Fed Chair has indicated that any withdrawal of pandemic-era stimulus is likely to be gradual, which bodes well for gold in the current scenario. Though the movement in gold is not expected to be linear amid the risk-on sentiments in the markets, we advocate accumulating gold in a staggered manner on dips for a medium to long-term perspective as long as the level of $1680 per ounce is holding on a closing basis in the international markets. On the higher side, prices will however face a major hurdle at $1960 an ounce or 52,500 per 10 gm level at the domestic market in the medium term. But, once this level is breached, we can expect the yellow metal price to march higher towards its lifetime high of 56,191 per 10gm at MCX."

Third wave of Covid

Pointing towards the Covid-19 factor fueling gold price rally in last months of 2021, Abhishek Chauhan, Head — Commodity & Currency at Swastika Investmart Ltd said, "One major factor that has led to this shift in market sentiment by money managers in the bullion sector is the unknown effect of the current Delta variant in regards to slowing down the economic growth in the United States and other countries. The surge of new infections across the countries predominantly due to the Delta variant of the Covid 19 virus has resulted in more than 155,000 new cases per day. More alarming is that the death count has now exceeded 1100 souls losing their lives each day in the United States. Rising inflation will be the overwhelming factor taking gold higher."

Rise in demand for physical gold

Abhishek Chauhan of Swastika Investmart went on to add that festival and marriage seasons are likely to come to create demand from India. Even central banks like Russia, China, and other banks are adding gold to their reserves, which will create the demand for gold intact. ETF buyers are also adding the gold as a hedge against inflation. He said that current gold price levels are very attractive for mid to long-term buyers. As global markets are at very high levels and correction in the global equity will create more demand for safe-haven assets like gold and silver.

Gold price target 2021

Asked about the expected rise in gold price by end of 2021 Abhishek Chauhan of Swastika Investmart said, "Gold has crucial support at 46,200 per 10 gm levels, which may act as stop loss for mid to long-term buyers, while mid to long-term targets for the year-end looks to be the recent high made by gold both on Comex at $2120 per ounce while on MCX around 58,000 per 10 gm. A break above the level of $2120 per ounce in Comex and 58,000 per 10 gm on MCX required interest rate to be at the current level from the US, which has come out from the recent US Fed's Jackson Hole symposium."

Silver price outlook

Asked about his views on silver price Abhishek Chauhan of Swastika Investmart said, "Silver has support at 61,500 per kg and it is likely to test 78,000 levels on MCX in coming months. On Comex, silver has support at $23.35 and the trend is looking bullish. It may move towards the recent high of 2020 at $30.60 and a rally beyond the same will lead the rise towards 2011 highs of $49. Silver prices are looking very strong for the upcoming months after the pickup in industrial activities post-Covid. Demand for metals by China and other major economies especially in the EV sector will be an added advantage that will push the prices of silver higher as compared with gold. We expect demand will be more in silver and likely to touch the levels of 85,000 per kg and beyond."

Speaking on silver price outlook, Sugandha Sachdeva of Religare Broking, said: "silver will remain a laggard in comparison to gold in the near-term as silver supply has been gradually rising this year after being impacted last year due to the pandemic induced mine closures, though in the long-term it looks to outperform gold because of its investment demand as well as rising industrial demand. There has been an enhanced focus on green energy initiatives globally, where silver is used in solar panels as well as in electric vehicles. Rising demand for green energy solutions is like to play out and underpin the prices of the white metal from a long-term standpoint. Total demand for silver is expected to surge by 15 per cent in 2021.

Another key dynamic to consider is the fact that silver has to yet to catch up with the base metal complex, where we have seen a stellar rally YTD. She advised silver investors to accumulate the white metal in the range of 58,000 to 60,000 per kg zone for a medium term target of 74,000 per kg at MCX. Longer term, room is open for levels of close to 88,000 per kg mark as well.

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