Domestic gold prices have appreciated 31% since last Dhanteras leaving investors guessing the quantum of gains they can expect in the near future. Domestically, gold prices at MCX hit an all-time high of Rs 56,200 in August 2020. However, the price of the yellow metal has fallen 11% since then after lockdown restrictions eased followed by the reports of development of Covid 19 vaccines.
Analysts expect gold prices to do well going ahead amid the festive season, coupled with accommodative global central bank policies and stimulus.
Traders said consumers are still wary of investing in the precious metal. As per Pre-Diwali Dhanteras sales of gold and silver, the overall business is likely to be muted amid current high rates and subdued demand due to the COVID-19 induced economic hardship. However, jewellers are expecting maximum footfalls on Friday on the occasion of Dhanteras
"Buy Gold Mini/Gold in a staggered manner - first levels of around Rs 49,200 - 48,700/10gms and second around Rs 47,700/10gms for target price of Rs 56,100/10gms initially and then Rs 60,500/10gms, while placing stop loss at Rs 46,900/10gms mark," advises Sugandha Sachdeva vice-president for metals, energy & currency Research at Religare Broking.
"Over the last decade gold in India has given a return of 159%. When compared to the equities, Dow Jones has given around 154% and the domestic equity index Nifty 50 has given 93% returns in the same period, which makes gold a star performer and particularly justifying the objective of protecting against inflation and depreciating rupee for Indian investors," said Navneet Damani, head of commodities & currencies research at Motilal Oswal Securities.
The auspicious metal can be purchased in the form of jewellery, bars and coins. Besides purchase of physical gold, other types of investment on gold includes, Gold mutual funds, Gold exchange-traded funds (ETFs), RBI issued Sovereign Gold Bonds (SGBs) and Gold futures and options derivatives contracts. Moreover, digital wallet providers such as Google Pay, Paytm and PhonePe also give you options to buy gold on their platforms.
However, as per World Gold Council, India's gold demand is expected to fall to the lowest level in 26 years with domestic bullion prices hitting a record high and falling disposable incomes could further curtail retail purchases. India's gold consumption in the first half of 2020 plunged 56% year-on-year to 165.6 tonnes.
Meanwhile, the coronavirus-triggered lockdown also slashed demand by 70% in the June quarter to 63.7 tonnes, the lowest in more than a decade, Angel Broking said in its report. According to the World Gold Council (WGC), gold demand in India thus far in CY20 stands at 252 tonnes, as compared to 496 tonnes in the same period last year.
The brokerage added later, "The investment demand will continue to rise in 2021 taking in to consideration the unprecedented amount of liquidity flush by central banks across the globe. The surging COVID infections also add cherry on the cake for global investors to increase their allocations towards the yellow metal. Although, the physical demand numbers released by the WGC do not represent a good story for India, Diwali is considered to be auspicious occasion for buying gold and irrespective of the price, gold is bought by Indians. It is advisable to increase gold allocation in your entire portfolio from 10% to 15 % taking into consideration the uncertainty revolving around global economy."
In the international market, gold was trading marginally higher at $1,865 per ounce and silver was flat at $24.09 per ounce. Traders said global markets are awaiting for fresh triggers weighing vaccine progress and surging virus infections across the globe.Infosys, ICICI Bank, Britannia stocks among top picks for Samvat 2077
Second wave of the virus in Europe as well as the US is further challenging the recovery, keeping the outlook for the bullion bullish. Further, unprecedented flow of funds by central banks worldwide with an easy money policy and low interest rates will also help gold to be considered as a go-to asset for global investors in these uncertain times.
Anuj Gupta- DVP- Commodities and Currencies Research, Angel Broking said,"Yesterday Gold prices increased by 0.86% and closed at 50600 levels and silver price increased by 0.32% and closed at 62739 levels as investors feared the economic impact of an accelerating rise in corona-virus infections."
He added,"U.S. Federal Reserve Chair Jerome Powell said that progress in developing a coronavirus vaccine was welcome news but that near-term economic risks remain as infections accelerate, underscoring the likely need for additional government stimulus. Weakness in Dollar supports the gold and silver. Physical demand is also increasing in India in the coming festival season."