No sharp gains or drop is expected in the yellow metal unless there are any changes in key fundamentals, say experts.
While equity markets have sizzled this year, gold has remained subdued throughout 2017 giving muted returns to investors. During the year, the yellow metal’s returns were in single digit, while Sensex, the bellwether Indian stock index, has returned nearly 29 per cent year-to-date.
“Gaining global stock market, the prospects of U.S rate hikes and global geopolitical tensions had affected gold prices,” Hareesh V, Head – Commodities Research at Geojit Financial Services told Moneycontrol.
In the international spot market, gold started trading at $1158.8 an ounce this year. It gradually rose and reached its year’s highest level of $1357.54 in the second week of September ounce. The yellow metal is currently trading near $1254 an ounce. “Gold has managed to gain about 9% so far during this year, despite rising U.S interest rates. Gaining global stock market, the prospects of US rate hikes and global geopolitical tensions had affected prices,” Hareesh said.
Prices in Indian futures market started at Rs 27,570 per ten grams. Tracking overseas market, prices gained to Rs 30,474 per ten grams by September before retreating towards the current range of Rs 28,000 per ten grams.
Aasif Hirani – Director, Tradebulls says even geopolitical tensions did not lift the mood around gold in 2017. “In 2017, gold underperformed in spite of weak US Dollar (Dollar depreciated 7 percent year-to-date against major currencies) and geo-political risk in form of North Korea’s nuclear missile testing” Hirani pointed out. Gold is normally seen as a safe haven in times of political tensions.
Hirani says strong equity markets will continue to keep gold under check. “As long as equities and bonds are trading at record highs, we don’t see fear-based investors coming into gold. However we don’t see any further negative developments for gold too. So $1,200 would be the ideal support for gold in COMEX. Any correction in equity market will augur well for Gold. In 2018, we don’t expect Gold to surpass $1370 but may try to retest the resistance of $1350 in second half of 2018,” he said.
Geojit’s Hareesh feels Gold will remain between $1440-1030 an ounce. “No sharp gains or drop is expected unless there are any changes in key fundamentals. The prospects of a further hike in interest rates in the US may possibly strengthen the dollar, which could pressurise gold,” he said.
Saurabh Gadgil, CMD, PNG Jewellers and Director, India Bullion and Jewellers's Association (IBJA), West Zone, also feels gold will remain range-bound in 2018. “Gold will remain range-bound in 2018 unless geopolitical tensions such as North Korea-US tension, have an impact. I expect gold to remain in $1250-1300 an ounce range,” Gadgil said.
For investors, Hareesh suggests staggering their purchases. “One can invest in gold at any time, but the best option is to accumulate systematically with small units. Since many domestic and international factors affect gold’s fortune, a close track of market moves is a must in case of short and medium investors. Rather, buying gold in physical units, paper gold or ETF can also be considered,” he said.Hirani hopes a slide in equity market can boost investors’ returns on Gold in 2018. “Looking at the current scenario where December US rate hike is done and there are expectations of 3 more rate hikes next year, the major negative news are already factored in gold prices. With equity market at record high, any stock market correction could boost the prices of gold. We are moderately bullish so investment up to 12 percent of total portfolio is recommended with addition of 5 percent if Gold comes near the level of $1180,” He said.