Should You Buy Gold At Current Price Levels?

Gold and silver prices in mid-week deal were trading mixed in the domestic market. At around 2:15 pm, gold on the MCX in the futures market for April delivery was trading higher by 0.28% or Rs. 134 at Rs. 48082 per 10 gm, while silver futures were down 0.14 percent or Rs. 96 to Rs. 69,600 per kg.

Internationally, gold prices got a lift on expectation of roll-out of massive US stimulus package as soon as this month. Also weak dollar spurred bullion's appeal. Spot gold rose 0.2 per cent to $1,839.99 per ounce while US gold futures gained 0.2 per cent to $1,840.40.

Gold prices trajectory since hitting record high in August 2020

Gold prices since hitting record high of Rs. 56,200 per 10 gm in August last year has been witnessing high volatility because of a number of factors:

1. Corona situation globally: Uncertainty around coronavirus situation dampens hopes around robust global economic recovery which is positive for gold. But now as the vaccination drive is currently underway in most nations there is seen economic resilience which goes against upward trajectory in gold.

2. Dollar index volatility: The US Fed has vowed to continue with its low interest regime ( a move that lifts bullion's appeal) and also would ensure dollar liquidity ( this dollar liquidity in turns results in softness in the greenback which again augurs well for gold).

3. Treasury yield: Any decline in US treasury yield also weighs on gold prices. Gold prices and US treasury yield share an inverse relationship i.e. rise in US treasury yield results in softening of gold prices and vice-versa.

Now for the movement in gold prices since August 2020, we have seen consolidation in gold prices over the last few months and recently corrected towards $1800 on the COMEX, said Navneet Damani, Head Research- Commodities & Currencies, Motilal Oswal Financial Services.

Should you buy gold now after it has corrected almost Rs. 8000 from lifetime highs?

At the Comex, the current price level of around $1800 is a good entry point for investment in gold from a short to medium term outlook, targeting new life time high towards $2150 per ounce. And if considering buying gold in India, the recent steep correction in the precious yellow metal post the Budget announcement which proposed to reduce custom duty on gold, shall be a good entry point for an upside target of Rs. 56500 and above over the next six months, added Damani.

Outlook for gold in the medium term

Bhavik Patel, Senior Technical Research Analyst, Tradebulls Securities does not expects any more correction in gold prices going forward and forecasts gold to scale to Rs. 51000 per 10 gm on the MCX in the medium term. He also sees the current correction in gold prices as an opportunity to buy the precious metal.

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