Category precious metals

Our last article on Gold rate today and Gold’s price prediction was in April’21 and since then, it has been a volatile ride for Gold and its investors.

Gold rate today and Gold’s price prediction for near future are:

Gold today is most undervalued amongst all the financial asset classes and it may go up to its lifetime high by end of 2022.

Weakness in US dollar, no sign of increase in interest rates post-Jackson Hole symposium in Aug’21 and demand for physical gold due to fast approaching festival season in India are all positives for this precious metal.

 At the highly anticipated Jackson Hole symposium last month, Fed Chair has indicated that any withdrawal of stimulus will be gradual, which is bullish for gold. Though its price movement is not expected to be linear amid the risk-on sentiment in stock markets, we advocate accumulating it at current and lower levels.

The central banks like Russia, China, and other banks are also adding gold to their reserves, which will keep its demand high. ETF buyers are also adding to their gold holdings as an inflation hedge. Global equity markets too are at very high levels and any correction in them will create more demand for this safe-haven asset.

Please find few other key reasons for our above Gold’s price prediction:

1. Higher Government Debt across the world – Please find debt of few major countries in the world,

 As the size of Fed balance sheet keeps increasing because of debt monetization, it leads to an extended time and era of negative real interest rates which is very bullish for gold prices.

2. Higher Stimulus by central banks since March’20 – It dilutes the value of money and hence positive for asset prices like Gold.

3. Negative Real Yields – Real yields with high inflation and lower interest rates are here to stay and this will drive Gold to new highs. We expect this to continue and have a long term price target of gold closer to INR 250000(Per 10 gram) and $12500 (Per ounce) by 2030. Also US fed chairman, Jeremy Powell has finally admitted on 29 Sep’21 that inflation is not transitory and is expected to stay at elevated levels.

4. Geo Political Risk – This century from 2000 started with dot com bubble burst, 9/11 attacks, Global financial crisis, Covid 19 pandemic, etc. All these scenarios lead to investors and liquidity rush to Gold. The recent incidents of Taliban taking over Afghanistan and AUKUS alliance in between US, UK and Australia will only increase the tension in between world super powers.

Hence, we can conclude that this a good time to be accumulating gold. It has consolidated well enough after a stupendous rise in 2019 and 2020 and is posed to make money again for its investors.

Please click here to read more about our reviews on Gold :

In continuation to our last post on 30’th Mar’21, when we expressed our bullish stance on gold, it has rallied close to 3%. There was a huge consumption demand for Gold in March 2021, breaking all previous records. In Feb’21, India imported close to 56.5 tons of Gold. This is highest for India for any month since April’19. The big surprise came in March’21 when India’s gold imports surged by 471% on an annualized basis and was 160 tons.

Goldm Jun Fut in India is closer to 45700 on MCX and international prices are at $1738. If they stay above $1725, then the next level to be tested is $1765, which is a 3-4% upside from current levels.

In our opinion, we are extremely bullish on gold because of the following reasons:

1. Higher Government Debt across the world – Please find approximate current debt of few major countries in the world,

This high level of debt leads to fiscal uncertainty and inflation outbreak. This is positive for gold prices. Also, as the size of Fed balance sheet keeps increasing because of debt monetization, it leads to an extended time and era of negative real interest rates, which is again a bullish case for gold prices

2. Higher Stimulus – Since April’2020, governments across the world have come out with huge stimulus packages to support their economies against the ramifications of Covid 19 pandemic. The case in example is of US. It has given close to $8 trillion dollars in total relief packages since Mar’20. This has again increased debt and creates inflation, which leads to gold buying as a safe haven. Also whenever there is a major relief package announced by US Fed, it leads to a lower dollar value which is a spur for higher gold prices.

3. High Demand – With prices of Gold having corrected by 20% since Aug’20, the demand has spurt in two major consuming countries, India and China. Data and reports suggested that Switzerland, which is world’s biggest gold refining centre, exported huge quantities of gold to Thailand in 2021, which is a regional trading hub in Asia.

In Feb’21, India imported close to 56.5 tons of Gold. This is highest for India for any month since April’19. The big surprise came in March’21 when India’s gold imports surged by 471% on an annualized basis and was 160 tons.

This support by high demand leads to a base formation in gold prices and it gears up to move higher when other supporting criteria’s moves in its favor.

4. Negative Real Yields –  As highlighted above in points 1 and 2, negative real yields with high inflation and lower interest rates are here to stay and this will drive Gold to new highs. We expect this to continue for an elongated time for at least 3-5 years.

5. Geo Political Risk –  World has not been a safer place in last so many centuries and current times are no different.

The world saw World war 1, World war 2, Cold war, Vietnam war, Afghanistan war, Asian crisis, Gulf war in the last century. This century started with dot com bubble burst, 9/11 attacks, Global financial crisis, Covid 19 pandemic, etc. All these scenarios lead to investors and liquidity rush to Gold and the coming times will be no different, with many geo political risk coming to life.

Hence , with so many factors turning positive for gold in last couple of years, we would like to conclude that it presents a decent opportunity to invest for medium to long term at the current juncture.

Gold prices have again corrected back to around 1700 dollars over the weekend after a short rally to around $1740 levels over last few weeks. This is roughly around the prices that Gold was close to 10 years back. Gold prices move will now be testing patience and conviction of traders and investors.

In India, prices of May Goldm Fut is seen around 44400 levels after a recent rally to 45600 levels.

This is because of higher US 10-year bond yields around 1.73% and dollar index hovering around 93 levels.

We all know that higher dollar is negative for gold prices.

Higher bond yields also take money and flows in them as gold and silver don’t give any dividends.

It was only few months back in Aug’20, when the entire world wanted a pie of Gold and the bull case scenario was presented even at a price of $2080 too.

That price had a lot of risk sentiment and risk premium priced in which has withered away because of vaccine roll out and higher growth expectations.

At the current juncture, when US administration has passed a $1.9 trillion package in 2021 and are in midst of a further $3 trillion infrastructure package, situation is ideal for a look at gold.

I would like to highlight that the amount of printing $ in US was quite stupendous in 2020 and the year saw 20% of the entire dollars in circulation being printed last year alone.

Hence, current levels can be looked at for investment in precious metals and the accumulation can start.

With Gold and silver having being corrected close to 20% and 15% from their last year highs, they are poised at an interesting level. This is a critical point for precious metals.

The decline happened as investors feared the dollar index has made a bottom around 89 and risk on trade with vaccination in the world is on. Many think that economic growth and inflation will be higher than anticipated and this will lead to tightening and harder stance by Fed much before than they anticipated.

However, after the FOMC meet on 17 March’21, it is quite ocular that interest rate will not be hiked by Fed before 2024. This coupled with high inflation is a classic bull case for gold.

Hence, calculated positions can be taken in both silver and gold at current levels.