Gold En Vogue! Festive Cheer And Global Uncertainty To Add To The Glitter
Gold has appreciated by 24.43% year to date; festive cheer will ensure this run continues.
Gold, seen as a safe haven in times of economic strife, has been in vogue since the beginning of 2016, and analysts expect global uncertainties and low interest rate regime to boost the allure of the yellow metal in the near-term.
Gold rallied 24.43 percent to $1,337.15 an ounce in September from $1,077.68 an ounce in January. The precious metal touched its 2016 high of $1,366.33 an ounce on July 8, and has remained in a $300 range this year.
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From September 2015 to September 2016, gold gained around 19 percent. This is stark contrast to the 12 months ended September 2015, when prices declined 5.93 percent.
Kunal Shah, head of commodities research, at Nirmal Bang Commodities Pvt. Ltd. holds a bullish view on gold for the next two years.
Lack of clarity on global interest rates trajectory is boosting the demand for gold, and even a 25 basis points hike by the U.S. Federal Reserve will not derail the momentum seen in the yellow metal since the start of the calendar year, Shah said in a phone interview with BloombergQuint.
While gold could find some support near $1,285 an ounce level on the downside, it could face some resistance near the $1,380-1,390 an ounce level.Kunal Shah, Head of Research - Commodities, Nirmal Bang Commodities
The bullishness is reflected in the reduction in discounts offered to customers in the physical market ahead of festive season, Shah added.
The bullish trend for gold will continue for at least a year or two, Hitesh Jain, senior research analyst at IIFL Wealth Management Ltd., told BloombergQuint in a phone interview. Jain has been bullish on gold for over a year now. The low inflation environment in the global market and negative yields on other assets are conductive for gold’s performance, Jain explained.
The U.S. presidential elections would also be a determining factor and a victory for Republican Party’s nominee, Donald Trump, could be good for prices of bullion, Jain added.
The element of uncertainty is a perfect recipe for gold.Hitesh Jain, Senior Research Analyst, IIFL Wealth Management
The demand in India is expected to remain robust in the second half of the financial year on account of normal monsoons, and the uptick in consumer demand, said brokerage firm Emkay Global Services in its report. An extended 37-day wedding season, 16 percent longer than last year, will also support gold prices, Emkay added.
Gold Glitters In India Too
International price of gold is a function of the strength of the dollar. So how has gold fared in rupees?
With Diwali just a few weeks away, spot gold prices on the Multi-Commodity Exchange of India Ltd. rose around 1 percent in September to Rs 31,227 per 10 grams.
Gold prices in India have moved in tandem with international prices, with domestic gold rising 24.94 percent to Rs 31,227 per 10 grams in Mumbai in 2016. Meanwhile, the rupee has depreciated 0.47 percent or 31 paise since the beginning of the year to 66.46 a dollar.
Gold also delivered better returns than its riskier peer - equities, in 2016, as the S&P BSE Sensex has gained just 8.3 percent this year.