Gold sees worst month in four years; what should investors do?

• Follow

Gold has posted its largest monthly fall since November 2016 in the month of June. Yellow metal prices dropped by Rs 2,670 to end the month below Rs 47,000-mark. On MCX, gold futures were marginally higher today at Rs 46,927 per 10 gram after a sharp fall in the previous month.

Anuj Gupta, Vice President (VP), Commodity and Currency Research at IIFL Securities said, “From the starting of year 2021 to till date domestic gold prices have corrected almost 6.17%. From the life time high of Rs 56,191 levels which were seen in August 2020, gold prices have corrected by almost 17%. Internationally, gold has logged the steepest fall of 7% in June after four years.”

Trigger behind the sharp fall

According to Gupta, the on-going vaccination drive, revival in the economic growth, strong dollar and the US Fed’s view on interest rates are the major causes for this correction we are witnessing in gold.

Gold prices have in fact been weighed down most part of June, by the Fed’s sudden hawkish shift and strengthening dollar. Fed officials have re-affirmed they are going to raise rates in 2023 as well as start tapering bond purchases. Experts say that a Fed rate hike will increase the opportunity cost of holding bullion and dull its appeal.

The dollar too has been holding firm near a three-month high scaled in the previous session. A stronger dollar makes greenback-priced metals more expensive for holders of other currencies.

Gold Outlook

Sandeep Matta, Founder, TRADEIT 

Strong dollar and rising bond yields are acting as inhibitor for gold prices and precious metal now needs some fundamental reason may be in form of employment data to move up. Prices are unsettled and market participants are advised to stay cautious either side

Amit Khare, AVP- Research Commodities, Ganganagar Commodities

Traders are awaiting Friday‘s employment situation report for June from the US Labor Department—arguably the most important U.S. economic data point of the month. The key non-farm payrolls number is forecast to come in at up 700,000 compared to a rise of 559,000 in May. The unemployment rate is seen at 5.6% versus 5.8% in May. Traders are advise to ignore fresh selling at lower levels and create long position in Gold.

Anuj Gupta, VP Commodities, IIFL Securities

Gold has consistently given positive returns in last 4 years. While the near term trend may be subdued, we have advised investors to buy on dips as the long term outlook for gold remains bullish.

ICICI Securities

Gold prices will consolidate in the range of Rs 46,700-47,200 levels in the short-term.