In India, gold has climbed about 28% this year and in 2021, the yellow metals will continue to remain in focus for investors, say analysts. In global markets, gold has jumped 23% this year, helped by a raft of pandemic stimulus measures that stoked fears of inflation. The precious metal is often used as a hedge against inflation.
“After a double-digit gain in 2019, this will be the second year in a row that gold will be posting a stellar rise,” says Nish Bhatt, Founder & CEO of investment consulting firm.
In the first two months of this year gold had posted marginal gain on the back of concerns of a slowdown in economic growth. A major uptick was seen in prices of gold from mid-March when the COVID19 hit the stage at a global level. In August gold had hit an all-time high of ₹56,200 on MCX.
“The outbreak of the pandemic and a spurt in the number of cases led to economic uncertainties. The excess liquidity injected by global central banks to boost growth led to investors flocking to gold which is considered a safe haven,” he said.
But since August, gold has shed nearly 10% gains from their life high levels on optimism over covid vaccines. Currently, gold trades about ₹50,300 in futures market.
“As we approach 2021, gold will remain in focus for investors, as central banks across the globe have pledged to keep rates low, and easy liquidity to aid growth. The latest instalment of stimulus package from the US government will add to the existing dollar liquidity in the system and may end up weakening the greenback. A weak dollar may push up gold prices. The efficacy of the vaccine, proper implementation of the vaccination process in developing countries, low-interest rate regime, and the global central bank’s stance on liquidity will guide gold prices in 2021,” Mr Bhatt added.
Axis Securities has a neutral stance on gold. “Overall investor’s sentiments have improved. Now, investors are betting higher on riskier assets like equity, these improved sentiments were further stoked by the optimism over covid vaccine. All these developments are keeping the gold prices under pressure. The improvement in global economy and likelihood of more predictable trade policies will further keep the gold prices range bound. However, lower interest rates and dovish policy stance could continue to attract investments in gold,” the brokerage said in a recent note.
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