Going ahead, we expect gold to trade in a broad range of USD 1260-1420/oz and bias may be on the upside.
Gold has huge significance in India as it finds a place on all occasions like birth, marriages, festivals etc. Apart from being an inherent part of our culture, gold is also valued as an investment.
The avenues for trading gold have risen in the last few years from physical gold, gold futures, exchange traded funds, mutual funds, RBI sovereign bonds and the latest being options. The mode of investment may vary but the outcome is to benefit from the movement in gold prices.
While there is no right time to invest in gold, some days are considered more auspicious than others. Akshay Tritiya, which falls on April 18, is one such day. The day has significance in many religions and is considered auspicious to start new ventures.
Since Akshay Tritiya last year, gold price have gained more than seven percent from about Rs 28,800 to Rs 31,000 per 10 gram. In the international market, gold has risen from about $1,265 per troy ounce to about $1,340/oz, an increase of 5.9 percent. Higher prices have however dented demand to some extent. Indian gold imports totalled about 160 tonne in the January-March period, down 35 percent from a year ago period.
Since gold prices in India closely mirrors the international market, we are bound to see volatility. However, the general bias is expected to be on the upside. Some of the factors which could support gold prices are increased geopolitical tensions, US-China trade conflict and concerns about the Trump administration.
The US and China have threatened to impose import tariffs against each other. If these plans are implemented, it could have major economic implications. Geopolitical tensions are high as the US and Russia are at loggerheads over Syria. Iran is also under scanner as the US has threatened to pull out of the 2015 nuclear deal. The US and North Korea are also expected to hold talks over denuclearisation next month. Concerns about Trump administration are high amid the frequent personnel changes and ongoing investigation into Russia's role in the 2016 US Presidential election.
While geopolitical issues are likely to increase gold's safe haven allure, the gains will be checked by Fed's monetary tightening outlook. The US central bank is optimistic about the economy and expects inflation to hit its target levels. This makes a case for faster rate hikes in coming months.
Going forward, we expect gold to trade in a broad range of $1,260-1,420/oz, with an upside bias till next Akshay Tritiya. Most of the geopolitical issues have been factored and a substantial break out of this range will happen only if tensions escalate substantially. On domestic front, gold prices could trade in a broad range of Rs 29,800-33,000 per 10 gram till next Akshay Tritiya.Disclaimer: The author is Vice President-Research, Kotak Commodities Services. 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.
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