While China is taking steps to slow its fast-growing economy, the US is showing signs of recovery, which could have implications for various asset classes, including gold. Kunal Shah, head, commodities research, Nirmal Bang Securities, talks to Krishna Merchant on the outlook for gold in 2011, the prospects for agri-commodities amid weather woes as well as crude oil prices. Edited excerpts:
Gold prices have crossed $1,400 an ounce mark this year. What is your outlook for 2011?
The worries over the sovereign debt crisis in Europe will support gold futures and may help prices rise to $1,450/oz on the Comex. However, for 2011, the outlook is mixed, as data points from the US suggest that economic recovery is gaining momentum, which will not be positive for the yellow metal. If the recovery in the US continues for the next six to eight months, there is a possibility of an interest rate hike in the US that will not be bullish for gold.
One can remain invested for now and book profits around $1,450/oz on international bourses and Rs 21,200-21,250 per 10 grams on domestic bourses.
What is your target for silver?
I am moderately bullish on silver after the rally this year. Silver prices may test $31.50 to $32/oz next year.
What is your call on agri-commodities? Do you see them consolidating? Should investors be invested in this space?
We are very bullish on agri-commodities on account of weather woes across the globe, mainly caused by la-Niña (weather phenomenon), which may continue next year and will be negative for production of agri-commodities. They are the best bet during weather uncertainties and can enhance the portfolio, giving great returns.
Our top picks are soybean, cumin seed, black pepper and soya oil. A drop in production and carryforward stocks are other reasons to stay invested in this space.
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Do you see crude oil prices surpassing the $100 mark in 2011?
I am not bullish on crude oil because without any major production increase, and without excess capacities of OPEC being used, crude has already touched $90 per barrel this year.
There are signs of recovery in the US, but at the same time there are a lot of idle capacities. Crude oil may touch $95-98 per barrel, but the upside may be capped at $100.