Gold price: What should be your yellow metal strategy? See expert advice

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Gold prices have been lacklustre on account of mixed activities across the globe. On one hand, the global economy is recovering from the pandemic with the help of fiscal stimulus measures backed by ultra-loose monetary policies and on the other hand, the Covid wave is keeping the safe-haven appeal intact to an extent, supporting gold prices.

Post making a new all-time high of $2,075 in August last year at Comex (Rs 56,200 per 10 grams), the prices plunged back to $1,700 levels at Comex and Rs 44,000 per 10 grams at MCX as soon as the vaccine news strengthened the dollar and US treasury yields.

Since then, the prices of the yellow metal again started finding support as the dollar and treasury yields corrected from the 14-month highs leading to gold prices improving to $1770-$1800 levels.

With fresh lockdowns in India, the retail and rural demand for gold has hit ahead of the festive season like Akshaya Tritiya and wedding season. Globally, the unwinding of institutional ETF positions pressured the prices during the last 6 months and with prices in lucrative range, the ETF demand may again find a place to diversify the overall asset allocation with a lot of uncertainties linked with Covid cases, vaccine effectiveness, lower interest rates, higher inflation numbers as we move ahead.

Central banks’ money printing in the form of stimulus measures to overcome the crisis and the all-time high deficit created in the US will also support gold prices. In India, rupee depreciation helped domestic gold prices to an extent and may continue to do so in the next two to three months with Covid cases on record-high levels.

With the current fundamentals, we recommend a buy on dip strategy where one may look forward to investing in gold around Rs 46,500 levels per 10 grams targeting Rs 51,000 by the next three months.

(The writer is head-commodities and currency, Axis Securities. Views expressed are personal)