The cost of gold has fallen by more than Rs 10,000 per 10 gram in the current previous. From a higher of about Rs 56,000 per 10 gram noticed in August 2020, the cost of the yellow metal is at present hovering about Rs 46,000/ 10 gram. Since January, the gold cost has dropped by pretty much Rs 4,000. Is the promising development noticed earlier appears to be fading away or is gold set for a rebound? Amidst quite a few speedy altering financial and political elements, the answer might not be as simple as it appears. For retail investors it is normally improved to be diversified in gold via Gold ETFs or Sovereign Gold Bonds to meet their lengthy term targets.
But, what has changed lately that is obtaining an effect on gold rates? Of the lots of other elements, increasing US yield is one of the elements that is maintaining the demand for gold low. If interest prices rise as witnessed in increasing yields, the demand for gold falls as it not an interest yielding investment. “Gold prices have slipped below the crucial Rs 46,000 per10 gm 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, an investment consulting firm.
If the fall in gold cost is due to the increasing yield, it may stay as an elements in the brief-medium term. In future, some other elements will be at play as a result impacting the gold cost. “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, new cases are under worldwide. Gold prices in India have lost over Rs 10,000/10gm or 18 per cent 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,” adds Bhatt.
Keeping an eye on the US yields will be important in the brief term. There could be more weakness in the gold cost if the yields remains buoyant in the coming weeks. “Navneet Damani, VP – Commodities Research, Motilal Oswal Financial Services says, “Gold prices fell to their lowest in nearly three months and headed for their worst week since end-November, as recent strength in U.S. Treasury yields dented the non-yielding metal’s appeal. Benchmark U.S. Treasury yields edged higher, having hit a near one-year peak earlier in the week. All updates regarding the Covid-19 stimulus bill and vaccine for Covid-19 and the new variant is impacting the market sentiment.”
The retail investors might look at adding some more gold in their portfolio in the present cost variety if the objective is lengthy term. “Broader range on COMEX could be between $1755- 1782 and on the domestic front prices could hover in the range of Rs 45,700- 46,300.” says Damani. The gold EFT and SGB remains the very best move forward to accumulate gold inside all round exposure of about 5 to 10 per cent in one’s portfolio.