Time to buy gold this Dhanteras? Analysts see price hitting Rs 67,000/10gm

The insatiable appetite for gold of Indian consumers peppered with economic uncertainty over the years has seen the yellow metal beat return from the equity markets over the last decade. From around Rs 20,000 per 10 gram around Dhanteras – a day considered auspicious for buying gold and gold jewellery – in October 2010, gold prices have surged a staggering 159 per cent since then to Rs 53,610 per 10 gram on Thursday on the occasion of Dhanteras, data show.

“Over the last decade gold in India has given a return of 159%. When compared to the equities Dow Jones has given around 154% and the domestic equity index Nifty 50 has given 93% returns in the same period, which makes gold a star performer and particularly justifying the objective of protecting against inflation and depreciating rupee for Indian investors,” said Navneet Damani, head of commodities & currencies research at Motilal Oswal Securities.

Over time, gold found support on healthy buying from central banks, record ETFs purchases and good institutional participation as a safe haven. US and China trade tension also supported the prices as two biggest global economies imposed trade restrictions and triggered a rush into this asset class. That apart, and the lockdown triggered by Covid-19 pandemic also saw investors buy gold as global equity markets went into a tailspin.

However, the yellow metal started to consolidate once the lockdown restrictions eased followed by the news of development regarding the Covid 19 vaccine. All this saw investors pump money into riskier assets, bringing down the yellow metal prices to $1880 levels. Domestically, the prices at MCX touched an all-time high of Rs 56,200 in August 2020.

With accommodative global central bank policies and stimulus, analysts expect gold prices to do well going ahead. However, a lot would depend on how the macro situation plays out. That said, calendar year 2020 (CY20) may well turn out to be the worst year for gold demand in India since 1995 if the current trends are extrapolated to full year forecasts.

According to World Gold Council (WGC), gold demand in India thus far in CY20 stands at 252 tonnes, as compared to 496 tonnes in the same period last year. Even if October – December 2019 (Q4CY19) demand of 194 tonnes is added to the CY20 demand till now, the total demand for CY20 will be lower compared to CY19 total demand of 696 tonnes. READ MORE HERE

“In the short term, Comex Gold could form a base around $1,880 – 1840, while rallies are likely to be capped in the range of $1940 - $1975. On the domestic front, we advise to start accumulating gold with every dip towards Rs 49,500 - 48,500, which is a good range to buy. Upside, for now, is capped around Rs 52,000 - 53,000 levels. On the longer-term, we continue to maintain our target of $2500 on the Comex and Rs 65,000 - 67,000 on domestic front,” Damani said.

Those at Axis Securities, too, remain bullish on the road ahead for gold prices and say the additional stimulus measures to deal with pandemic, lower real yields backed by higher inflation across the globe may support the prices up towards Rs 52,500 – 53,500 levels again in a months’ time.

“Buy Gold Mini/Gold in a staggered manner - first levels of around Rs 49,200 - 48,700/10gms and second around Rs 47,700/10gms for target price of Rs 56,100/10gms initially and then Rs 60,500/10gms, while placing stop loss at Rs 46,900/10gms mark,” advises Sugandha Sachdeva vice-president for metals, energy & currency Research at Religare Broking.