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With the Covid-19 devastation refusing to ease in any substantial manner, investors could be looking at investing in gold considering the uncertainties around. There is clamour from various quarters for a nation-wide lockdown, which could impact economic activity and push back growth of the domestic economy once again.

However, would the uncertainly push gold prices higher and reach closer to the life-time highs that they reached in 2020 when the Covid-19 pandemic broke out. MCX gold futures touched a record high of Rs 56,191 per 10 grams in August 2020. However, the prices plunged to a year’s low of around Rs 41,000 in early April, 2021. However, since then it has recovered and is ruling above Rs 47,000 in recent days.

“Gold rallied in 2020 responding to the heightened risk and uncertainty sparked by Covid-19. Further, there were heightened concerns on inflationary prospects and dollar debasement thanks to the unprecedented monetary and fiscal pandemic relief in the US and world over. However, breakthroughs in vaccine development since November 2020 and optimism of economic recovery has led to gold prices shaving off some gains as markets focused on risk assets,” said Chirag Mehta – Senior Fund Manager – Alternative Investments, Quantum AMC.

Where is gold headed?

However, where is gold headed from here? Gnanasekar Thiagarajan, Co-founder and CEO, Commtrendz, believes gold is likely to remain muted in the coming months and is unlikely to reach its previous highs in a hurry. “Gold price is unlikely to touch its previous high soon mainly because US economy is recovering. Bond yields in the US are rising. When markets start pricing in interest rate hike during such times gold seems to underperform,” he said.

Thiagarajan feels the yellow metal will be range-bound in the next two to three months. “Gold is unlikely to go too high from present levels. It will maintain a 45000-50000 range in the next month or two,” he said.

Is the long-term prospect bright?

In the longer term, however, Thiagarajan feels gold could breach Rs 52,000. “There is a chance that rupee could depreciate from current levels. When rupee depreciates it favours gold prices. Depending on further development it may touch Rs 52,000 per 10 grams,” he said.

Mehta also feels that there a triggers to support gold in the longer term. “Going forward, the dollar debasement and inflation from $1.9 trillion pandemic relief and potential $2 trillion infrastructure spending by the Biden administration in the US will support gold. In addition, the accommodative stance of the Federal Reserve will ensure that interest rates stay low, supporting non-yielding gold. With many countries seeing resurgence in Covid -19 cases and hiccups in the vaccine rollouts, risk and uncertainty on the pandemic front too will support gold,” Mehta said.

Is gold a buy?

So, should you buy gold at present levels? Thiagarajan feels one should buy only if one can hold on to the investment for the long term. “Take a long term view and buy gold. If one has a long term perspective these are great levels to buy,” he said.