Moneycontrol
Feb 07, 2018 01:07 PM IST | Source: Moneycontrol.com

Gold set for ‘dramatic move’ amid stock turmoil; here’s where it is headed

The severity of fall in equities has rattled investors and there will be a move towards gold, say commodity experts.

Sarbajeet Sen

Which asset class will benefit most from the volatile global markets, including Indian markets? Commodity experts say gold could be the winner if equity markets continue to tumble or show extreme volatility as in recent days.

Experts tracking the yellow metal say that major indicators are in favour of a rally in gold prices and that there could be a major up-move in coming days.

“I expect a dramatic move in gold soon. The fall in global equities will be the trigger,” Gnanasekar Thiagarajan, Director, Commtrendz Research told Moneycontrol.

He said that the move upwards is likely to commence after a couple of days. “After the sudden drop in stocks in recent days, investors might be liquidating other assets to fund margin calls. Once that is over money could shift to gold as a safe haven. The severity of fall has rattled many investors and it will push many towards gold,” Thiagarajan said.

He said that gold had the potential to touch $1650 an ounce in the international market. This is substantially higher than the current $1340 levels that is has been trading at in the London spot market. “Ideally, we expect $1375 zone to be broken and price to rise to $1650 levels, a potential technical target,” Thiagarajan said. He said the levels could be reached as early as June 2018.

Besides the equity market slump, the key bullish drives for the yellow metal, according to Thiagarajan are rising interest rates which confirm inflationary concerns and rising crude oil prices. “Potential geopolitical flare-ups, improving physical demand in key buying nations India and China and investment demand as a hedge against any correction in soaring stocks should aid gold,” he said.

Biren Vakil, CEO, Paradigm Commodity Advisors, fixed a more modest target for gold at $1450. “I think the fair value for gold at present is $1450 in global market and Rs 33,000 in the Indian market. Gold is back in the game. The meltdown of stocks will be good for gold,” he said.

MCX gold futures were trading around Rs 30,700 per 10 grams on Tuesday.

Hareesh V, Head – Commodities Research at Geojit Financial Services, is also bullish on the yellow metal. “Gold prices in Indian market have been recovering in last few months. There has been a positive trend in the futures market since mid-December. Gold has to clear $1370 levels to become a strong buy. There will be resistance at $1400,” he said.

Domestic gold price movements generally mirror price trends in the International market. “International gold prices have also rallied during recent times which was the main reason for domestic rise. One of the main reasons giving strength to gold has been the slump in the dollar index. Investors can accumulate at current levels,” Hareesh said.
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