Will gold continue to glitter? Analyst see yellow metal at Rs 68k by year end, silver to follow

Gold prices recently hit a fresh record high of Rs 55,339 per 10 grams on the MCX and $2,056 per troy ounce in the futures market.

The so-called safe-haven has been the best performing asset class in 2020, rising nearly 43 percent year-to-date. However, silver managed to outperform gold with a 50 percent rally. In comparison, Nifty is down 9 percent so far in 2020.

Prices of the precious made new highs on the back of ample liquidity following the stimulus measures taken by central banks around the world to support the economy ravaged by the coronavirus crisis. Rising tensions between the US and China, geopolitical uncertainty and a fall in dollar further propped up the prices.

"With the aggressive stance of central banks to push unprecedented amounts of liquidity and keep interest rates lower coupled with reignited trade-war concerns and rising COVID-19 infections and a threat of second wave infections providing a significant hindrance to global economic growth along with lingering geo-political uncertainty provides a convincing fundamental backdrop for continuation of uptrend in both precious metals," Kishore Narne, Head - Commodity & Currency at Motilal Oswal Financial Services said.

Slowing jewellery demand is more than replaced by investor demand into ETFs as well as coin and bar sales, he added.

Prathamesh Mallya, AVP- Research, Non-Agri Commodities and Currencies at Angel Broking said the easy money policy resulted in higher yields on asset classes which are considered to be safe in times of uncertainty.

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Rising cases of COVID-19 across the world especially in the US has lead analysts to believe that another round of stimulus could be in the offing. The world's largest economy has already announced a $3 trillion stimulus package, but the Democrats have asked for an addition $400 billion in fiscal measures. The two sides have been negotiating for a week now.

Meanwhile, a blast in Beirut, where several people killed and thousands were injured, also lifted gold sentiment.

Hence, experts expect the rally in gold to continue and feel silver could outshine yellow metal till the global economy shows strong recovery path.

"We continue to be bullish on gold with potential targets between Rs 65,000 to 68,000 per 10 grams and silver expected to reach anywhere between Rs 82,000-88,000 over the next 12-15-month period," Kishore Narne said.

"We continue to recommend investors to keep a higher allocation towards Gold and use every dip to accumulate the metal," he added.

Prathamesh Mallya feels unless the global economy starts its recovery path, precious metals will continue to shine for the rest of 2020.

As silver has been shining relatively faster and brighter in comparison to gold in the international as well as domestic markets, prices will eventually move higher towards $27.5 per ounce in the international market and Rs 75,000 per kg in the domestic markets, taking into consideration the recent momentum in the metal, Mallya said.

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