Rising COVID cases may push demand for gold, should you invest now?

• Follow

Gold prices slipped below the key Rs 45,000 level on March 22 in Indian markets, while silver rates tumbled amid weak global cues.

Gold prices fell as the dollar strengthened and Turkey replaced its central bank governor with a high-interest rate critic. This led to investors flocking towards the safety of the dollar. Experts pointed to the fact that concerns around developments in Turkey which could threaten other financial markets strengthened the dollar, making gold expensive for non-US investors.

On MCX, gold futures dipped 0.7% to Rs 44,700 per 10 grams in afternoon trade, while silver futures slumped to Rs 65,948 down over 2% by mid-day. The weakness increased amid the recent rise in the US treasury yields and volatile equities.

Gold prices are in fact almost 21% below the highs it hit last year in August 2020 in the Indian markets. The fall is pretty similar to the one in global markets.

Gold prices in India are down over Rs 5,000 so far this year and compared to August highs of Rs 56,200 they are down over Rs 11,000.

The demand for buying gold in the country, however, remained subdued over the week which had perked up earlier this month after gold prices dropped to a nearly one-year low of Rs 44,150.

The decrease in demand for gold was also seen in tandem with the surge in coronavirus cases in India, with  43,846 fresh infections reported on March 21.

“Increasing coronavirus cases globally and in the domestic markets are likely to increase demand for safe-haven assets like gold against other asset classes and this may push the prices higher again,” Anuj Gupta, Vice President, Commodity and Currency Research at IIFL Securities said.

On international prices, he said that gold is facing strong resistance at $1,750 levels but once it breaks this level and sustains above this mark, then we can witness a fresh rally in the gold price. In terms of MCX, a sharp gold price rally is expected above Rs 45,600 per 10 gm, he said

As for a trading strategy, Gupta says, “For today traders can buy gold at Rs 44,900 levels with the stop loss of Rs 44,600 levels and for the target of Rs 45,500 levels. They can also go for ‘buy’ in silver at Rs 66,300 levels with the stop loss of Rs 65,400 levels for the target of Rs 68,000 levels.”