Rahul Gupta, Head of Research - Currency at Emkay Global Financial Services, said that gold remains the ultimate safe haven amid rising cases of COVID but rising US inflation and speculations over US taper tantrum are key risk for gold prices.
"The overall outlook is positive and as long as MCX gold prices remain above Rs 44,500 per 10 grams, the view will remain bullish towards Rs 48,000 and Rs 50,000," he said in an interview with Moneycontrol's Sunil Shankar Matkar. Edited excerpt:
Q: What is the reason behind the range-bound movement in gold prices after around 20 percent correction from record highs?
Overall, there is optimism over a strong global economic recovery, especially after a pickup in economic data from the US, UK and Eurozone. Also, the coronavirus vaccination distribution has been pretty successful in those nations compared to Asia, this has limited the surge in gold movement.
Q: Why one should buy gold on Akshay Tritiya? What is the importance of Akshay Tritiya?
According to the Hindu calendar, Akshay Tritiya is auspicious in the sense that it brings never-ending, happiness, prosperity, and success. People prefer buying gold on this day as it is believed it brings forth more wealth and prosperity in the future.
Q: What are the major risks (global and domestic) that are keeping away the gold prices from rallying?
The major risk is the rising US inflation and speculations over US taper tantrum. If the US 10-year Treasury yields scales on the back of an earlier than expected fed rate hike, then it will simultaneously increase the opportunity cost of holding gold. When the Fed starts to hike interest rates, the dollar will be more attractive than gold, however, in current times, with the world grappled by coronavirus, gold is the ultimate safe haven. Also, on the local front, due to regional lockdowns and strict curfews, there has been a fall in demand for physical gold.
Q: What factors (global and domestic) support gold prices?
The Federal Reserve's willingness to tolerate more inflation is has helped the gold bulls. With US economic data being strong and the Fed not turning hawkish, we could see the dollar being a little subdued, pushing the gold higher. Locally, the spurt in COVID-19 cases in India will be conducive for the rally in safe-haven MCX gold prices.
Q: What is your overall outlook on gold price for the coming year, what should be the strategy and what should be the investment portion in portfolio?
The overall outlook is positive and as long as MCX gold prices remain above Rs 44,500 per 10 grams, the view will remain bullish towards Rs 48,000 and Rs 50,000. If prices fall below Rs 44,500, then the fall may continue towards Rs 42,500 and Rs 41,000. Also, every dip Is a buying opportunity and gold must be included in the investment portfolio in a manner that enables you to achieve your long-term financial goals.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.