Gold prices fall to 8-month low, plunge 20% from record high; where will yellow metal prices go from here?

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February 17, 2021 11:09 AM

Gold prices in India fell for the fifth straight day on Wednesday, tracking weak global market trends. The US dollar and Treasury yields surged

gold, mcx gold, us dollar, us treasury yieldsBullion prices pared the previous week’s gains during the week witnessing selling on risk-on sentiments. Image: Reuters

Gold prices in India fell for the fifth straight day on Wednesday, tracking weak global market trends. The US dollar and Treasury yields surged. At current prices, gold is trading at the lowest levels in eight months. On MCX, gold April futures were trading Rs 147 or 0.31 per cent down at Rs 46,752 per 10 gram. While silver March futures were ruling at Rs 69,456 per kg, up Rs 84 or 0.12 per cent on Multi Commodity Exchange. In August 2020, MCX gold hit an all-time high of Rs 56,191 per 10 grams, since then it has plunged Rs 9,400 or 20 per cent, to trade below the crucial Rs 47,000. A host of factors have been pushing gold prices down such as import duty cut in Union Budget 2021, higher treasury yields like inflation expectation, elevated energy prices, record-high equity prices, progress in Biden’s stimulus deal, continuing ETF outflows and sharp correction in platinum prices.

Bhavik Patel, Senior Technical Research Analyst, Tradebulls Securities, told Financial Express Online, that gold prices have dropped below $1800 to nearly two weeks low on strength in US Dollar and rise in US Treasury Yields. Prices of gold have appeared to reverse its course after a failed attempt at the start of February to test its recent high of $1872. Globally, spot gold was down 0.2% to $1,791.36 per ounce while US gold futures slipped 0.6 per cent to $1,788.40. In Union Budget 2021, Finance Minister Nirmala Sitharaman announced to cut base customs duty on gold and silver. Bhavik Patel expects gold prices to retest levels of $1760 it made during Nov 2020.

Where are gold prices headed from current levels?

In MCX, below its immediate support of Rs 46600, Gold may test levels of Rs 45700-Rs 45600 where there would be an opportunity to go long, Patel said. While in the short term, Patel sees a weak trend and expects it might see some bouts of short-covering here and there.

Jigar Trivedi, Fundamental Research Analyst, Anand Rathi Shares and Stock Brokers, told Financial Express Online, believes that gold prices may trade in a range of Rs 45,000-45,500 in coming sessions. He advised investors to buy on dips as Indian jewellery buying will emerge from these levels in 2021. Also, relaxation in lockdown norms will help also in more buying.

Gold prices have witnessed much-needed correction from the all-time highs made in the year 2020 on pandemic worries. The vaccine rollouts and strong optimism over economic recovery have led to some liquidation in the yellow metal with risk-on sentiments. Tapan Patel, Senior Analyst (Commodities), HDFC Securities, told Financial Express Online that MCX gold prices are expected to trade sideways to down for short term with support at Rs 44,000 per 10 gram. The overall trend for gold is still bullish with a view of Rs. 58000 per 10 gram in long term. The expanded balance sheet from major central banks, ultra low-interest rates are the key driver for the demand for gold which will keep downside limited.

(The views and investment tips in this story are expressed by the respective experts of a 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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