Gold prices near lifetime high ahead of Akshaya Tritiya. Is it a good time to buy yellow metal?

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Published: April 24, 2020 12:35 PM

Gold prices have jumped nearly 18 per cent from its recent low of Rs 38,400 per 10 grams hit on March 16, 2020. While silver futures have surged 20 per cent from its recent low of Rs 33,580 per kg

gold, silver, Akshaya tritiya 2020As gold prices have hit lifetime highs twice this month, experts suggest that it is a good time to buy the yellow metal.

Gold prices edged higher on Friday ahead of Akshaya Tritiya as investors rushed to safety amid lockdown and fast-spreading coronavirus. In India, the total number of COVID-19 patients have crossed 23,000-mark, according to the government data. Last week MCX gold prices hit a record high level of Rs 46,785 per 10 grams. Gold June futures were trading close to their lifetime high level, at Rs 46,635 per 10 grams, up Rs 208 or 0.45 per cent. Similarly, silver may futures were ruling Rs 194 or 0.46 per cent higher at Rs 42,000 per kg. As gold prices have hit lifetime highs twice this month, experts suggest that it is a good time to buy the yellow metal. “It is the best time to buy gold as unprecedented fiscal and monetary stimulus will ultimately lead to currency debasement and ultimately higher gold prices,” Bhavik Patel, Commodity/Currency analyst at Tradebulls Securities told Financial Express Online.  

Gold prices have jumped nearly 18 per cent from its recent low of Rs 38,400 per 10 grams hit on March 16, 2020. While silver futures have surged 20 per cent from its recent low of Rs 33,580 per kg. Last year on Akshaya Tritiya, around 33-35 tons of gold was sold. However, due to coronavirus-led lockdown, in the month of March, India has just imported 25 tonnes of gold against around 94 tonne last year,” Anuj Gupta, Deputy VP- Commodities & Currencies Research, Angel Broking Ltd told Financial Express Online. “Last year on Akshaya Tritya, gold prices were trading at Rs 31,500 levels and this year it’s around Rs 46,500. It has given almost 47 per cent return to gold lovers,” Anuj Gupta further added.

As India is under a 40-day lockdown period, direct sale from jewellery shops is not possible. Many digital wallets and gold outlets have come with products like online gold sales and Gold certificates to gain traction. “Gold acts as a hedge against inflation, and historically its value has appreciated during uncertain times, war, pandemic, or an economic slowdown. Since, Gold is an international commodity priced in USD, any depreciation in INR will lead to a further rise in prices of Gold. Value of the yellow metal has risen over 40% in the last year alone. During economic uncertainty, Gold is generally a safe and profitable investment; therefore, the outlook for gold remains positive in the near term,” Nish Bhatt, Founder & CEO, Millwood Kane International, said.

Is it a good time to buy gold?

On the back of lower global growth forecast and uncertainty, the gold trend seems to be positive. “This time gold is trading on higher levels (recently gold touched the lifetime high of 47,327 levels). Technically, we are recommending to wait for some correction till 38000 to 40000 to buy gold for the target of Rs 50,000 to 52,000 in gold prices,” Anuj Gupta said.

A host of factors are likely to boost the rally in gold prices. Currently, the world is witnessing massive demand destruction which is leading to an economic recession, this is benefiting the gold prices right now. “Bonds may no longer play a safe haven role as thought to balance equity risk and gold will step in to fill the vacuum left by bonds. Lower interest rate, lower bond yields, risk aversion sentiment, fiscal and monetary stimulus, inflationary pressure due to constrained supply chain, you name it- all these reasons points that gold will go up,” Bhavik Patel added.

Gold to touch Rs 52,500 per 10 grams this year

Even as physical demand for gold has been badly hit, analysts still believe that yellow metal will continue to shine. “While the Indian stock markets have seen a huge panic sell-off given the global pandemic, the yellow metal has delivered a return of 12 per cent in the last one year. With major global central bankers already lowering rates significantly, the further scope for a reduction in rates is either not there or is very limited, which makes gold more attractive. We see gold can test level beyond Rs 52,500 per 10 gms this year,” Ajay kedia, MD, Kedia Advisory told Financial Express Online. 

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