See gold in Rs 29.5-30k range; buy silver on dips: Narne

With the government adding curbs on gold imports in order to combat widening current account deficit (CAD), the prices of gold are only going to go up, believes Kishore Narne of Motilal Oswal.

In an interview to CNBC-TV18, Narne says that until and unless there is any reversal in the rupee/dollar relationship, prices of the yellow metal are unlikely to fall.

"I am not very bullish on gold in the international market because as soon as Fed starts tightening or Fed starts tapering of QE3, gold will be the first thing to be effected and as interest rates strengthen in US, gold is going to lose its shin significantly," adds Narne.

Additionally, Narne advises investors to use any fall opportunity in silver to buy it.

Below is the edited transcript of Narne’s interview to CNBC-TV18.

Q: Lots of potential curbs on gold imports that are lined up but how do you see the metal pan out, what are the levels that you see on the MCX in terms of both floor as well as the ceiling?

A: The tougher the government is making gold availability in India, more the prices are going up. It is adding to the price through import duty hikes, which has been the cause for the rally in gold right now. Predominantly, we are looking at a ceiling of Rs 30,000-31,000 per 10gm, which is almost 5-10 percent from here.

On the floor area, it is typically driven by the rupee because rupee is going to be a significant factor in determining gold prices. So, unless and until we see any reversal in rupee/dollar relationship, we are not seeing any major decline in gold. Though, even rally should be curbed, I am not very bullish on gold in the international market because as soon as Fed starts tightening or Fed starts tapering of QE3, gold will be the first thing to be effected and as interest rates strengthen in US, gold is going to lose its shin significantly.

Hence, I am looking at somewhere close to USD 1,180 per ounce or even below that in the next three-four months in global markets. So, that would make Indian gold not rally too much except the rupee/dollar weakness. On the lower side, probably Rs 28,000-27,800-27,500 per 10gm is the floor at this point of time.

It is again a fairly short-term view and on the higher side Rs 29,500-30,000 per 10gm should be a ceiling at this point of time.

Q: Usually silver has more beta than something like gold and the government is trying to raise the import duty even on something like silver, so what is the kind of movement that you expect in silver and as a trader can someone make money in the short-term by playing silver?

A: Silver has discounted more or less the duty hike in yesterday’s trade but looking at the scenario, we should expect silver to rally further more towards around Rs 47,500 per kilogram or maybe Rs 48,000 per kilogram in a better case. So, in the best case scenario, Rs 48,000 per kilogram is an upside potential.

One can make a short-term trade in this. Any dip in silver right now can bee seen as a buying opportunity. But at the same time, similar to gold, as the interest rate tightens in US and other developed countries, probably gold and silver both will lose as an investment grade commodities. So, keeping that view in mind, probably Rs 48,000 per kilogram should be a good resistance for Indian silver prices.