CA Kaushal Jaini, Head – Wealth Management and Research, Dani Securities doesn't see poll outcome driving gold price.
The general investor sentiment on gold is weak. Despite many seeking refuge in the metal, gold prices are struggling sustain on higher levels and breach those key levels, and other assets have once again found place on investors' radar since the financial crisis witnessed between 2008-2013 is more or less out of way, say experts. Equity markets are at all-time high with further scope to go up given fair valuations. Post Akashay Tritiya, the next major occasion to binge on gold for Indian investors would be Dhanteras, which is nearly six months away. Between now and then, certain events could play a key role in determining in which direction gold price will move. While El Nino may lead to poor monsoon thereby dragging rural gold demand lower; removal of current curbs on gold-import may aid sentiment. Also Read: El Nino, polls, weak economy: Should you still buy gold? Elections outcome: The equity market seems to have factored in BJP-led NDA coming to power at the Centre. There are expectations that the Nifty may even breach 7,500 level on positive poll outcome. While an unfavourable poll outcome may its toll on Indian indices, it is likely to boost gold demand, which seen as refuge against volatility, says Sandeep Sharma, senior analyst, Hem Securities. Further, rise in dollar demand will make the Indian currency weak and that will ultimately boost domestic gold price, he adds. Agreeing with Sharma, Gnanasekar Thiagarajan, Research Director, Commtrendz adds after equity markets regain stability after digesting unfavourable election outcome, the rally seen in gold will be short-lived. However, CA Kaushal Jaini, Head – Wealth Management and Research, Dani Securities, doesn't see poll outcome driving gold price. Election results will be declared on May 16. Ukraine crisis: Gold was not a hot favourite of investors early this year, but rising tensions between Russia and Ukraine have spurred a safe-haven gold buying. Lacklustre gold was stuck in Rs 28,000-Rs 29,000/10gms for some time now. Sharma expects gold to break this technical resistance of Rs 29,000/10gms, especially if Ukrainian crisis intensifies. Gnanasekar is not too worried about the impact of Ukraine woes on gold prices. "The crisis has had minimum effect and prices are unable to sustain at higher levels. Also, producers have resorted to hedging, which protects them from price risk. So, any rallies could be short-lived as producers could start hedging as prices rise,” he reiterates. If the situation in Ukraine worsens there would be spike in gold prices, but gold is unlikely to test 35,000/10 gms mark because of the crisis alone, he adds. Jaini also feels that the impact of Ukraine crisis won't succeed to take gold price to 35,000/10 gms. Outlook and Key levels: Gnanasekar expects gold prices to come under pressure in the coming six months and there could be intermittent relief rallies leading to bargain hunting at lower levels. He feels that physical buying at lower levels could cushion the downside and on the positive side, if prices fall below the cost of production (nearly USD1200 /oz) then production cuts and cost cuts could support gold. He is bearish on gold from perspective of next six months, however, a decline close to USD 1200/oz or lower could be utilised as an ideal long-term investment opportunity, he advises. Factors like unresolved macro imbalances in some key emerging-market economies and continued uncertainty about the strength of US, Europe and Japan would keep the demand for perceived safe havens such as gold strong going ahead, says Hem Securities. According to the broking firm, key upside and downside levels to watch out for this year would be Rs 31,500-Rs 27,500/10gms. Consumption demand for gold is still intact, however price correction has not lead to heavy demand push, says Jaini. On the global front, USD1250-USD1400/oz is the key range to watch out for, he adds.
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