Good time to buy gold after recent fall in prices; yellow metal may make new high by 2021

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November 13, 2020 12:39 PM

As Dhanteras is an auspicious day to buy gold, Patel said that from a returns perspective, gold is expected to give strong returns next year.

Dhanteras, diwali, gold, silverThe recent correction in gold prices is a good time for those investors who missed the recent rally

Gold prices were trading in the positive territory on Friday, tracking positive trend in international spot prices amid fast-rising COVID-19 cases. Analysts suggest that investor focus will now shift to speeches by the presidents of the US Federal Reserve Banks of Chicago and New York regarding monetary stimulus and economic stability later in the day. On MCX, gold December futures were trading firm with 0.17 per cent or Rs 85 gain at Rs 50,685 per 10 gram. On the other hand, silver December futures were ruling flat at Rs 62,751 per kg. “The correction in gold on Monday has been positive for Indian gold buyers as they will get to buy gold at Rs 50500 instead of Rs 52500 levels last week,”  Bhavik Patel, Senior Technical Research Analyst at Tradebulls Securities, told Financial Express Online.

MCX gold to make new high by 2021

As Dhanteras is an auspicious day to buy gold, Patel said that from a returns perspective, gold is expected to give strong returns next year. Earlier on Monday, gold prices fell Rs 2,500 and silver over Rs 5,100, ending at Rs 49,748 and Rs 60,854, respectively. The recent correction is a good time for those investors who missed the recent rally. It is a good opportunity to accumulate gold as the trend is likely to remain positive due to the low-interest-rate environment and excess liquidity flushing in the financial system. “We expect a new high in COMEX and in MCX by either 2021 or in the first quarter of 2022. So for a strong and healthy return, we recommend buying gold on this auspicious day,” Bhavik Patel added.

Since last Diwali, gold prices have rallied 30 per cent. Analysts are of the view that the trend of gold buying during the festive season may continue but may not be comparable to the previous year sales due to lockdown. “Gold should be a part of every investor’s portfolio, depending upon the risk appetite it can be in the range of 5-15%, with paper gold being the most convenient route to invest in the yellow metal,” said Nish Bhatt, Founder & CEO, Millwood Kane International. The availability of the vaccine for large medical use, development on the next stimulus package from the US, possible fiscal steps by the ECB, the US-China tariff issue, and Brexit are likely to guide gold prices.

Gold’s performance in Diwali season

Gold and silver prices are still far from the record highs of Rs 56,191 Rs 77,949 per kg, respectively, hit in August this year. According to the analysts at Motilal Oswal Financial Services, investors buy gold as a hedge against inflation and uncertainty, although Indians have another purpose of investing in gold, which protects their purchasing power against the depreciation of rupee over longer periods. Over the last decade, gold in India has given a return of 159 per cent. When compared to the equities Dow Jones has given around 154 per cent and the domestic equity index Nifty 50 has given 93 per cent 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. Gold has performed very well till now on a year-on-year (YoY) basis. 

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