Up, Up & Away?
There have been reports that China's GDP is likely to slow down to 6% in 2017 from the 6.5% projected in 2016, with growth unlikely to rebound in the near term. With Chinese equity markets in the doldrums and the real deposit rate turning negative, Chinese gold buying is expected to pick up. This is likely to fuel the rally in the coming quarters.
Uncertainty in US rate hikes
Given low inflation fears and instability in global financial markets, the US Federal Reserve is unlikely to go ahead with a rate hike in March. From the earlier talk of two hikes this year, market pundits have scaled down the expectation to a single hike or none at all. A prolonged period of low rates will prove to be supportive for gold.
Negative interest rate
Gold proved to be a safe bet all over again thanks to the negative interest rate policy adopted by several of the central banks in Europe, Japan, Sweden and Denmark. There is speculation that such a policy stance will actually backfire instead of helping the struggling nations because it will only distort financial markets. Given the integrated financial ecosystem across the globe, asset classes have turned sensitive to central bank policies.
Price pattern is indicative that upwards momentum is likely to continue. So it is worth buying on dips now as the prices are likely to tread higher towards Rs 32,200/10 gm ($1,350 an ounce) from a medium-term perspective.
Jayant Manglik, president, retail distribution, Religare Securities
All the current factors which are driving the yellow metal price are likely to remain unchanged, leading to further upside. This goes with a caveat-volatility is the new constant. A gradual increase is desirable and more sustainable than sudden spikes or drop in prices.
Keyur Shah, CEO, precious metals business, Muthoot Pappachan Group