Gold prices hit eight-month low - Should you invest now?

After a huge rally last year, gold prices have softened to Rs 45,980 per 10 gram on Friday, to hit its eight-month low. The prices of the yellow metal have fallen by over Rs 10,000 or 18% from the highs of Rs 56,200 per 10 gramme in August 2020. Year to date, gold prices are down by about 8% this year. The rise in the US Treasury yield and stronger dollar, optimism of a larger economic stimulus package, and the vaccination drive have led to downside pressure on gold prices.

"Gold prices have slipped below the crucial Rs 46,000/10gm level, to hit an 8-month low. The rising treasury yield is indicative of a recovery in the US economy. The yellow metal has also lost investor's interest as the vaccination drive picks up pace, new cases are under worldwide. Going forward risk of a second wave of cases, easy liquidity, global economic recovery will guide gold price," says  Nish Bhatt, Founder & CEO, Millwood Kane International - an investment consulting firm.

Most industry experts expect a further fall in the gold price. With yields rising and technical levels under fire, the fall in gold prices may continue, they say. Some even expect the prices to fall to Rs 43,000 levels.

"MCX gold prices continue to trade with a negative bias. And the bearish outlook for the counter will stay until prices trade below 47,000. Bounce will face resistance until then and prices will slip towards 45,525/45,110/44,800 areas. A decisive break above 47000 is required for the bulls to make any meaningful comeback," says Rahul Gupta, Head Of Research-Currency, Emkay Global Financial Services.

"The Short-term trend is down according to the daily chart. The short-term range is 46,800 - 45,600 and currently metal straddling its 50% level at Rs 48,200," says Kshitij  Purohit, Lead Commodities & Currency at CapitalVia Global Research.

Anand Rathi Shares & Stock Brokers sees the MCX gold to fall further to Rs 44,700 - 43,000 in coming months. "Indian jewellery buying from these lower levels may provide support but pressure in the international price may drag domestic gold lower," says Jigar Trivedi, Research Analyst- Commodities Fundamental, Anand Rathi Shares & Stock Brokers.

A decline in the gold price has benefitted jewelers. They have started to witness good demand. "We are currently running a very attractive offer on our Diamond jewellery and we are seeing good response there. We are also seeing good traction across gold, light weight and wedding jewellery with gold prices having cooled," says Arun Narayan, VP - Category, Marketing & Retail, Tanishq, Titan Company.

Should you invest in gold now? According to the experts, this opportunity of lower gold prices should not be missed. "Long-term investors should grab this opportunity to accumulate the gold at these levels. Investors should buy gold in the range of 45,600 - 45,800 with the strong support stop loss of 44,500 for the midterm to long views," says Kshitij Purohit.

"The optimism that vaccines would heal the global economy in just a few months has been dampened by the outbreak of new variants and problems with the vaccine rollout in the developed world. Given the current risks, uncertainty and continued commitment to accommodative policies, gold prices definitely seem stretched to the downside, making now an opportune time to build your gold allocation," says Chirag Mehta, Fund Manager - Alternative Investment, Quantum Mutual Fund.

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