It’s festive season around and one question once again on everybody’s mind is that what do we buy this Dhanteras and Diwali? Is it really the right time to invest in precious metals? We say yes! With the on-going rally in the domestic equity market, which is close to its all-time high level and growth in the economy returning, will gold still be a good investment avenue and an alternative asset class which will pay-off in the near future. The calendar year 2017 has been a good year so far for gold. In last nine and a half months, we have broadly seen a bullish trend except in the months of June 2017 and September 2017. The yellow metal traded past $1350 or Rs.30400 to score new highs in early September 2017. But then bears dominated the rest of the month to bring the curtain down with an over three percent of losses on monthly basis. However, prices are trading within the impressive lead taken in the month of August 2017 which is the reason why we are still counting on the yellow metal over the possibility of the continuation of positive trend this Diwali.
Meanwhile, the biggest surprise came in the form of U.S payroll numbers on October 6, 2017 when the key non-farm employment data fell in the negative territory for the first time in last seven years. This should have immediately propelled bullion prices to new monthly highs BUT the fact that the disappointing payroll numbers were a result of major disruption brought by Hurricane Harvey and Irma in September 2017; the market soon absorbed the news and went on the level playing field provided by a decade low unemployment rate. But all of the above paradoxes and facts failed to keep bullion prices under check, making the yellow metal emerge as a winner. Moreover, the winner is looking in no mood to retrace at least till the next U.S Fed meeting scheduled on November 1, 2017. Actually, more than the meeting, it is the release of payroll numbers on November 3, 2017 which data watchers are awaiting. Of course, in the short-term we have one mega event even before November Fed meeting and payroll numbers. It is our very own Diwali which begins with the auspicious day of ‘Dhanteras’. Taking current sentiments & facts based situation into account, we are going to see Gold adding more glitter this Diwali.
The upside targets for gold are anywhere in the range between $1360-$1390 or Rs.31200-31800 for this Diwali. Quarterly targets may get an extension till $1440. If we look at perceptions regarding fate of the bullion prices in current quarter then a low unemployment rate at 4.2% is clearly the talk of the town. The magical number is the reason behind talks of a certain rate hike when the US Fed will hold the last meeting of 2017 on December 14, 2017. This, coupled with a possible trend revival in dollar index may put pressure on gold prices in quarter end. But that’s a story to be told later. For the moment, glitter like gold, shine with happiness and enjoy the festivities. Over the long term, investing some part of savings in gold always fetches good returns. At the same time, it creates protection against erosion of purchasing power either to the exchange rate or inflation. International gold prices continue to be influenced by the state of affair of the global economy. The global economy is going through a peculiar phase of anemic growth. As such, gold would certainly be one of the preferred asset classes for investors.
By Arpit Jain