Gold at new lifetime high globally after 11 years, surge in silver unabated

In India, prices are usually determined by the cost of import. Since gold is priced in dollars, rupee depreciation in India keeps prices and returns much higher.
The international spot gold price hit an all-time intra-day record high of $1,945 an ounce on Monday, breaching the nine-year-old record of $1,921 an ounce, amid rising tensions between the US and China and worsening Covid-19 crisis. The yellow metal was trading around $1,942 at 8.12 IST.

Silver, too, was trading above the $24 an ounce-mark as investors continued to rush towards safe-haven assets.

In Mumbai's Zaveri Bazar, standard gold closed at Rs 52,309 per 10 gram, up from Friday's closing of Rs 50,919.  Silver, on the other hand, closed at Rs 64,505 a kg, against Friday's Rs 59,885.  On the MCX, August 5 futures of gold was trading at Rs 52,090 per 10 gram (8.12 pm IST); September 4 futures of silver was Rs 65,337 a kg.  

Closure of major mines, along with the gold rally and industrial demand, have been pushing silver closer to a record high.
The gold market cycle usually lasts 8-10 years and according to experts, the bull run in the bullion has just started. The previous bull cycle had started in 2001 and ended in 2011 during which the metal had turned seven times costlier. After peaking, it had slipped 46 per cent and consolidated for several years. 

 

 
According to US-based analyst Nigam Arora, the author of The Arora Report, “Gold has entered a bullish phase, which can last several years. We also think that there is better than 50 per cent probability of gold approaching $3,000 in this cycle.” Earlier, Christopher Wood had said in his Greed and Fear report that gold could climb up to $4,000 in the current bull cycle.

In India, the price of gold is usually determined by the cost of import. Since gold is priced in dollars, depreciation in the India rupee keeps its price and returns much higher.

So, should investors put money in gold amid this bull run? Arora has a piece of advice for them: “In the short term, gold is technically overbought and there is resistance in the $1,900-$1,917 zone. If this resistance is broken, the psychological number of $2,000 will act as a magnet for traders.  However, since gold is technically overbought, it is vulnerable to a sharp correction. In our view, a sharp correction, if it occurs, should be bought.”

The risks to the bullish phase are an early Covid-19 vaccine, an acceleration in economic growth and a rise in interest rates. “It is important to stay nimble and alert to new data,” he advised. 

Even Ajay Kedia of Kedia Advisory said: “Nothing is going to stop bulls from pushing the gold price higher. However, at high levels, gold may see many investors booking profit this week. Investors have to be cautious as the US Fed meeting is scheduled on Wednesday. Hence this week is crucial because it can either make or break the rally in the gold price”

From a four-five-month horizon, gold is worth buying, said experts.

Also, silver is fast catching-up with the rally in gold. Arora said though decisive signals on silver movement are awaited, in India, many have turned bullish. Silver futures are already above Rs 65,000 per kg and it is just 15 per cent away from the all-time high of Rs 75,000 seen in 2011.

Gnanasekar Thiagarajan, CEO of Commtrendz Risk Management Services, said: “Until the presidential election in the US is over, this uptrend is expected to continue. By October/November, we expect gold to test $2350 and silver to test $29.70. In the Indian markets, gold can touch Rs 60,000 and silver Rs 72,000 by Diwali.”


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