Gold prices at new all-time high, entering years-long bull run: Analysts

Investment in precious metal safe based on outlook for India in the next four months

Gold hit an all-time high on Monday as ties between China and the United States rattled investors, boosting the allure of safe haven assets. The metal was trading at $1,933 per ounce in the international market and in India it was above Rs 50,000 per 10 gram. 

A gold market cycle usually last 8-10 years, indicating that a bull run is underway. The last rally started in 2001 and ended in 2011, when prices went up sent times from the 2001 level. After peaking, prices fell 46 per cent and consolidated for years.

“Gold has entered a bullish phase that can last several years. We also think that there is better than 50% probability of gold approaching $3,000 in this cycle,” said US-based analyst Nigam Arora, author of the popular The Arora Report, a newsletter service on investments.

Christopher Wood, global head of equity strategy at Jefferies, said in a report earlier that gold could rise to $4,000.

Imports, in US dollars, decide gold price in India. The dollar may weaken due to Federal Reserve policies and the U.S government’s government, giving gold tailwind. Real interest rates are negative, helping gold.

“In the short term, gold is ‘very’ overbought and there is resistance in the zone of $1,900 to $1,917.  If this resistance is broken, the psychological number of $2,000 will act like a magnet for traders.  However since gold is technically overbought, it is vulnerable to a sharp correction. In our view, a sharp correction, if it occurs, should be bought,” said Arora.

The risk in gold investments is interest rates rising on the hope of the world getting a vaccine against the coronavirus disease and global economic growth picking up. “It is important to stay nimble and alert to new data,” he said.

Gold is worth investing, based on analysts’ outlook for the next four months. “Till the US elections are over this uptrend is expected to continue. By October-November, we expect gold to test $2,350 and silver to test $29.70 by the same time. In the Indian markets gold can touch (Rs) 60,000 by Diwali and silver around 72,000 levels,” said Gnanasekar Thiagarajan, the CEO of Commtrendz Risk Management Services.

Indian jewellers said demand is weak and demand has moved to paper gold. In rural India, there is some traction due to agriculture income improving.

 “The price of gold has constantly shown a skyward movement in its price and has emerged as a preferred investment option for Indians. Younger consumers, are now looking at making long term and systematic investments in gold,” said T S Kalyanaraman, Chairman and Managing Director of Kalyan Jewellers.

"From spending on leisure activities and gadgets, they have shifted their focus to assets that drive both desirability as well as incremental value. We are therefore expecting demand for gold jewellery to come from this set of new-age consumers,” said Kalyanaraman.

Silver is catching up with gold. In India, silver is already above Rs 60,000 per kilo and it is just 25 per cent away from all-time high seen in 2011.