Gold prices rise today on US stimulus deal, rally 30% YTD; will it repeat 2020’s performance in 2021?

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December 22, 2020 10:42 AM

In the international market, gold prices edged higher as agreement on the US stimulus package increased its safe-haven appeal. So far on a year-to-date (YTD) basis, MCX gold has gained 29.02 per cent.

gold, silver, MCXGlobally, spot gold rose 0.1 per cent to $1,878.72 per ounce. US gold futures rose 0.1 per cent to $1,884.60 per ounce

Gold prices were trading higher in India on Monday, following rates in the international market. On MCX, gold February futures were trading 0.21 per cent or Rs 104 higher at Rs 50,520 per 10 gram while silver March futures were ruling 0.83 per cent or Rs 575 up at Rs 69,593 per kg. In the international market, gold prices edged higher as agreement on the US stimulus package increased its safe-haven appeal. So far on a year-to-date (YTD) basis, MCX gold has gained 29.02 per cent. “Gold and silver have seen a steady climb through the week with few deviations from the path higher. At the same time, the US Dollar has weakened, bolstering gold’s role as a primary safe haven in the final weeks of 2020,” said Navneet Damani, VP, Motilal Oswal Financial Services.

Also read: Gold, Silver may continue to trade with bullish bias as Covid-19, lockdowns keep risk premium high

From the March lows of Rs 38,500 per 10 gram, gold prices had rallied 46 per cent and touched Rs 56,191 per 10 gram in August this year. At today’s level, gold prices are off 10 per cent or Rs 5,671 from its record high level. While silver futures zoomed to Rs 77,949 in August from Rs 33,580 per kg touched in March 2020. For the last week of the calendar year 2020, Navneet Damani said that market liquidity and headline-flow will both be light, as is always the case in the week of Christmas. With the vaccine developments and updates, market participants’ eyes are also set on the new stimulus bill which will continue to give a boost to the market sentiment. “Hence, the development of all variables and uncertainties will be in focus hence it is advised to maintain a cautious approach. Broadly, we expect gold to trade sideways to positive this week,” Damani added.

Globally, spot gold rose 0.1 per cent to $1,878.72 per ounce. US gold futures rose 0.1 per cent to $1,884.60 per ounce. According to Reuters, holdings in SPDR’s Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.2 per cent to 1,169.86 tonnes on Monday from 1,167.82 tonnes on Friday. Domestically, COMEX gold was trading in a narrow range near $1885/oz after a 0.3 per cent decline in the previous session. “Gold trades in a range as support from renewed virus concerns, US stimulus progress and pickup in ETF buying is countered by recovery in US dollar index from recent lows and continuing progress on the vaccine front,” said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.

Will gold repeat 2020’s performance in 2021?

Bhavik Patel, Senior Technical Research Analyst at Tradebulls Securities, told Financial Express Online, that gold has major resistance around $1911 and yesterday’s inability to hold above $1900 suggest that there could be selling pressure on the upside as the world is waiting for more clarity that how the vaccine will react with the mutated virus. Patel added that the strong return in 2020 might not be replicated in 2021 due to global economic recovery. “But the biggest positive factor for gold next year would be inflation and we expect gold to re-test new highs in 2021,” Patel said. Interest rates would not be going higher next year, which will give significant support for the precious metal.

Gold may test Rs 52,500 in 2021

Patel said that any dip is an opportunity to buy or add gold in the portfolio. Despite the strong economic recovery, 2021 could give gold another run-up due to high inflation and negative-yielding debt. “We expect gold to trade in range of 49500-51000 this year-end and expect testing highs of Rs 52000-Rs 52500 next year,” he added.

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