Gold prices fall more than Rs 8,000 from record highs; where is gold headed? Should you buy?

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Updated: Feb 10, 2021 11:06 AM

Gold and silver prices inched higher for the fourth consecutive day in domestic markets on Wednesday, following the positive international trend in global rates.

Gold, silver, mcx, gold prices,Since the start of 2021, gold prices have been very volatile after it hit a record-high of Rs 56,196 per 10 grams in August last year. Image: Reuters

Gold and silver prices inched higher for the fourth consecutive day in domestic markets on Wednesday, following the positive international trend in global rates. On MCX, gold April futures were trading Rs 122 or 0.25 per cent up at Rs 48,070 per 10 grams. While silver March futures were ruling at Rs 69,850 per kg, up 154 or 0.22 per cent. Since the start of 2021, gold prices have been very volatile after it hit a record high of Rs 56,196 per 10 grams in August last year. In global markets, expectations of a massive stimulus package in the US lifted bullion’s appeal, along with a weak dollar. Spot gold rose 0.2 per cent to $1,839.99 per ounce while US gold futures gained 0.2 per cent to $1,840.40.

Bhavik Patel, Senior Technical Research Analyst, Tradebulls Securities, told Financial Express Online that gold has erased almost all of December’s gain and is now slowly finding its feet with $1780 as its base. Gold prices have started recovering after Democrats released the first draft of key legislation that will comprise President Joe Biden’s Covid-19 relief bill. Ahead of Chinese Lunar New year, physical demand for gold in China has picked up. “We have started to see premium increasing from some refineries and bulk suppliers for gold and silver bars indicating supply tightness,” Patel said.

In Union Budget 2021, Finance Minister Nirmala Sitharaman announced to cut base customs duty on gold and silver. Navneet Damani, Head Research- Commodities & Currencies, Motilal Oswal Financial Services, said that domestic import duties were quite steep and there was a growing need for duty cuts from various participants.

Should you buy gold now?

Navneet Damani said that gold prices have consolidated over the last few months and recently corrected towards $1800 on the COMEX where we are comfortable buying for a short to medium perspective targeting new life time highs towards $2150. On the domestic front, Damani added that the post budget price correction is a good level to enter once again for an upside towards new highs of Rs.56,500 and above over the next 6 months.

The recent correction is a good opportunity for investors to buy gold if they had missed the previous rally, Patel said. Bhavik Patel doesn’t anticipate any strong correction in gold going forward and expects prices to test again levels of Rs 51000 in MCX in the medium term.

Where is MCX gold headed?

MCX gold is trading at one-week high following the announcement of duty cut in Union Budget 2021. Kshitij Purohit, Lead Commodities & Currency at CapitalVia Global Research Limited-Investment Advisor, told Financial Express Online that according to the daily chart, the mid-term trend in gold is down. Purohit said that a trade below 46200 will confirm the downtrend again, however, it will change the main trend once it sustainably crosses 49400 levels successfully. The major support is a long-term retracement zone at 45800 to 46200 levels as from this level rally started in December month. The short-term range is 49600 – 46800 and currently metal straddling its 50% level at 48200. “Investors should buy gold in the range of 46600 – 46200 with the strong support stop loss of 45800 for the short-term target of 49600, mid-term target of 51500,” Kshitij Purohit added.

(The views and investment tips in this story are expressed by the respective experts of research and brokerage firm. Financial Express Online does not bear any responsibility for their advice. Please consult your investment advisor before investing.)  

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