Kishore Narne of Anand Rathi Commodities explains to CNBC-TV18 that gold is not a great vista for investment in rupee terms and the global rally may be short-lived as it is driven purely on hope. He also suggests traders to sell both gold and silver in the short-term.
Below is an edited transcript of the analysis on CNBC-TV18.
Q: Is it good to go for gold, especially for investors who are buying the metal in rupees?
A: No, I don't think so. Our macro call still remains that the rupee will appreciate significantly over the next five-to-six months and especially towards March, the rupee might be touching the 48-levels.
So in rupee terms, there might not be any big sustainable gains in gold. Even on the international front, I think the current rally has a bit exceeded the fundamentals and is purely driven by hope rather than any strong fundamental support at this point of time.
So if the Jackson Hole meeting disappoints or the ECB doesn't come out with a kind of surprise which market is expecting, especially after September 15, I think the markets will be significantly disappointed and will return to the USD 1,500-levels.
At this point of time, if somebody is trading long, I would strongly suggest to book profits and maybe re-enter once prices return to the Rs 30,400-30,300 levels, for short-term trading purposes. But for long-term investors who are looking at a time-frame beyond six months, I still think that gold is not a great vista for investment.
Q: Along with gold, silver and platinum are the other two precious metals which have been doing very well. What is your call on both metals?
A: Regarding silver, the current rally has been primarily driven by short covering. If you see the Commodity Futures Trading Commission (CFTC) data, there have been huge short positions which have been built up in silver and there is a technical breakout at this point of time in silver which is causing a lot of short covering.
So I think there will be sustainability in the rally only if there is an announcement of a QE3 or a major infusion of liquidity into the market. Otherwise, I think silver will also correct.
But I think on a larger scale, silver will probably outperform gold slightly over the next three-to-six months. A level Rs 63,000 cannot be ruled out on silver, but again the trading range will be much wider for long-term clients. On the lower side, it will be Rs 47,000-48,000 and on the higher side it will be Rs 62,000-63,000.
Q: Can you suggest some trading strategies on silver and gold for the domestic trader for one-month and two-month futures whichever you prefer?
A: I think for the short-term, I would suggest traders to sell both gold and silver. Gold is currently ruling with stop loss of around Rs 30,850 and traders could look for targets close to Rs 30,450-30,500.
Regarding silver, I would suggest traders to sell it even at the current levels with stop losses of Rs 57,500 for the September futures and look for targets close to Rs 55,500 and expect a Rs 1,000-1,200 downside in silver.