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The rising COVID-19 cases across the globe will further induce central banks to continue its easy money policy leading to investments in gold in an uncertain environment. Gold ETF have been primary driver of investments in gold in 2020. However, 2021 is different as Global gold ETFs lost 18.3t tonnes (t) (-US$1.1bn, -0.5% AUM) in April 2021, marking outflows for five of the past six months. However, global outflows slowed significantly, as European funds added assets for the first time since January. Global assets under management (AUM) stand at 3,567t (US$203.0bn),1 after slipping below $200bn for the first time in over a year during March 2021.

Since the peak asset levels in November 2020, gold ETF AUM has fallen nearly 14%, with 8% coming from outflows and 6% coming from the gold price selloff in US dollar terms.

Central Banks continue to be net purchasers of gold in 2020 and according to the survey by World Gold Council, they will continue to favour gold as a part of their reserves in 2021. The survey outcomes says that - 75% believe that global central bank gold holdings will increase in the next 12 months compared to 54% last year. In totality, the pandemic induced uncertainty, rising covid cases globally, easy money policy of the central banks, low interest rates, and possible purchases by central bank in 2021, will favour investments in gold and in turn the price of gold to be higher.

For investors in India, Gold prices have corrected from highs of around Rs.56000/10 gms mark to around Rs.47600 mark as of 11th May 2021. Those who have missed the rally before can invest in gold, in times of uncertainty. Hence, it is advisable to buy gold this Akshay Tritiya which is on 14th May 2021.

On the above quarterly price chart of Gold, it is clearly seen that prices are following the long-term Bull trend and made a lifetime high of 56,191 levels. On the technical price charts we can see “Higher Top- Higher Bottom” formation. In the last quarter price closed with Bearish candlesticks, hence prices are likely to test higher bottom levels in this shortterm consolidation.

As per moving average prices are trading above its 10 and 50 EMA (quarterly basis), which shows optimism in long term trend. Technical Indicators MACD is showing positive divergence which also supports the bull trend.

Support could be seen at 44,100 to 43,600 ($1700 - $1680) levels. Below the levels, strong support could be observed at 40,600 ($ 1560) levels.

Resistance could be seen at 51200 to 51700 ($ 1,970 - $ 1,995) levels. Above the levels, the next resistance levels would be at 54,700 ($2,110) levels.

Looking towards a positive chart structure and indicators showing optimism we recommend buying in Gold. Considering this short-term consolidation in prices around the lifetime high suggests that it is trying to rest in the bull rally and waiting for further correction in the dollar Index. Any correction near to support levels may give the opportunity to buy gold.

Buy MCX Gold between 44100 – 43600, SL – 40600, Target – 51200 / 51700.

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