Sugandha Sachdeva VP-Metals, Energy & Currency Research, Religare Broking Ltd says that Diwali is not just about a festival in India which comes every year, rather a different vibe which can be sensed everywhere. It has been a tradition to purchase gold on this occasion which remains the most preferred choice and considered wealth itself in the Indian households. Amid the economic distress caused by the Covid-19 pandemic, gold has lived up to the expectations while delivering great returns along with safeguarding investors’ portfolios. Precious metal has become more precious than ever with its stellar performance and clocked almost 44 percent returns at its peak marked in August this year. Not only the COVID-19 situation, assemblage of several other factors such as the macroeconomic issues, political uncertainties, and investment demand steered the metal northwards.

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The U.S. Federal Reserve has recently adopted a new approach to monetary policy in which it will tolerate higher inflation averaging 2 percent and above, committing to leave interest rates near record lows for a longer period. Since gold acts as a hedge against inflation and uncertainty and it also shares an inverse correlation with interest rates, prices are likely to remain supported for an extended period. Dollar has lost the safe haven battle against gold this time. While gold has gained 32 percent YTD from its March lows, in contrast, the dollar index has retreated 10 percent from its March highs as it shares an inverse relationship with the same. Soft dollar makes gold cheaper for holders of other currencies and increases demand for bullion.

Investment demand for gold has seen a sharp rise as the yellow metal continues to outperform major asset classes this year due to its safe haven appeal. Global net inflows of 1,003 tonnes in 2020 have pushed the gold ETF holdings to a new all-time high of 3,880 tonnes so far. Price outlook suggests that there may be some volatility in prices, but dips would remain a good buying opportunity where one can buy the precious metal in a staggered manner. The major support for prices rests at Rs 47700-47200/10gms in case of any adverse move on the downside and as long as this holds, prices will remain underpinned.

Trading Strategies for Near term and Long term:

Religare says Near term Strategy for traders should be to Buy Gold Mini/Gold around Rs.49700-49900/10gms for target price of Rs.51800/10gm and next Rs.53700/10gms mark, while considering Rs.48500/10gms level as stop loss.

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Long term Strategy should be to Buy Gold Mini/Gold in a staggered manner at first levels of around Rs.49200-48700/10gms and second level of Rs.47700/10gms for target price of Rs.56100/10gms initially and next Rs.60500/10gms, while placing stop loss at Rs.46900/10gms mark.