Analysts say latest headlines regarding COVID-19 vaccine is negative for gold but investors should wait for the dust to settle before making any changes in their gold investment.
Another reason for sharp sell-off in gold is that the vaccine news reduced the chances of the government injecting more stimulus into financial markets.
Gold prices were trading in the positive territory on Tuesday after crashing 5 per cent in the previous session on optimism around COVID-19 vaccine trial results. On MCX, gold December futures were trading Rs 594 or 1.19 per cent higher at Rs 50,342 per 10 gram, while silver December futures were ruling at Rs 62,186 per kg, up Rs 1,332 or 2.19 per cent. Analysts say the latest headlines regarding COVID-19 vaccine is negative for gold but investors should wait for the dust to settle before making any changes in their gold investment. In the previous session, gold prices fell Rs 2,500 and silver over Rs 5,100, ending at Rs 49,748 and Rs 60,854, respectively. “We feel in short term this is an opportunity to buy gold since it is trading at lower levels and if gold continues to trade below $1850 for next 48 hours then we might see more sell-off till $1800,” Bhavik Patel, Senior Technical Research Analyst at Tradebulls Securities, told Financial Express Online.
Patel said that another reason for sharp sell-off in gold is that the vaccine news reduced the chances of the government injecting more stimulus into financial markets. “This is why we have seen the unwinding of long trade build up in the last 6 months. However we don’t see interest rate hiking anytime soon so low-interest rates will be positive for gold in the long run,” he added. This news is just shifting expectations of a new stimulus measure which is getting reflected in gold prices.
COMEX gold rose about 1.5 per cent to trade near $1882/oz after a 5 per cent decline yesterday. Gold bounced back after taking support near $1850/oz. Loose monetary policy stance of major central banks and worsening virus situation in Europe and US are supporting the gold prices. “However, weighing on price is progress on the vaccine front, reduced expectations of a large US fiscal stimulus package and mixed ETF activity. Gold may witness choppy trade as market players assess the current worsening virus situation against the prospect of a vaccine,” Ravindra Rao, VP- Head Commodity Research at Kotak Securities, said.
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. Jigar Trivedi, Fundamental Research Analyst, Anand Rathi Shares and Stock Brokers said that even as the vaccine development news is positive for the dollar, it would take minimum one quarter to get the medicine in the market. “Hence, gold may not fall further and buying is likely to emerge now,” Trivedi added.
Despite yesterday’s sharp fall in gold prices, Bhavik Patel still believes that gold prices will map an upward trajectory. Patel said that the selling pressure appears to be overdone and now gold once again will slowly climb back to $1900 levels.