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Below is the Note on Akshaya Tritiya by Navneet Damani, VP - Commodities Research, Motilal Oswal Financial Services
Gold prices have been very attractive in the recent past amidst the uncertainties weighing on the global economic growth. All the uncertainties like trade war between US and China, geo political tensions, dovish central bank actions and many more have been increasing the bets for safe haven asset. There has been series of events lined one after the other which pushed the gold prices to its highs, apart from other uncertainties, outbreak of COVID-19 since the start of this year has petrified the market and increased distress in major economies globally. As panic increase demand for gold does too although witnessed in the recent past amidst the lockdown situation and all other asset classes bleeding red, market participants liquidated their positions from gold in order to sit on cash in this difficult time. In the previous year(2019) gold prices have rallied over 25% last year and this year again has given ~10% returns.
It’s a hedge against inflation, an investment and it is an insurance depending on the market participant. Under the time of distress or panic gold performs best as investors wants to get out of riskier asset and take a shelter under the safe haven asset i.e. gold. Metal prices have had an aggressive run just in the last one year hence it is one of the best indicator to gauge the level of uncertainties in the market.
The menace created by COVID-19 is increasing the dent on the growth of global economy. As the lockdown has taken effect in major countries globally, there is serious trouble getting created in the market for the supply demand scenario. Investors can turn their focus to other sources of investments, that is paper gold , ETFs ,digital gold (ME-Gold) or trade on the exchange directly depending on the risk appetite and the tenure for which an individual wants to invest.
Since we have seen such a good run up and liquidation in other assets classed, there could be bouts of correction in the near term. But the medium term picture still looks very promising and expect gold on the Comex to above $2000 and domestic gold prices could target upwards of Rs.52000 over the next 12 months. The attached charts will help you get a technical perspective on how gold could move on the domestic market over the next 12 months.
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