With equities trading volatile, gold has emerged as a preferred bet for a section of investors. Since January has remained positive for bullion, the retail investors can buy on every dip, said Jigar Trivedi, Research Analyst – Commodities Fundamental, Anand Rathi Shares & Stock Brokers. Considering the fact that the yellow metal generally begins every year on a bullish note, the prospects for gold are favourable, Jigar Trivedi told Ashish Pandey of Financial Express Online. On silver, he said that the conditions are perfect to see gains in the silver price in the coming months and years.
Here are the excerpts of the interview:
What’s your outlook for gold in 2020?
The prospects for gold are favourable in the present economic milieu. MCX gold is heading for its biggest annual increase since 2010 as it is all set to end 2019 with a whopping more than 24% returns. 2020 will be as golden as 2019 has been. The most critical trigger would be an election in the U.S. The US has had plenty of contentious Presidential elections throughout its history. The 2016 contest was a rough affair, primarily because of the campaign and style of President Donald J. Trump. Brexit is also an issue that has to get resolved from the EU too.
Meanwhile, the trade war, Iran, and the many other issues facing the world could add to uncertainty in 2020. The central bank gold-buying spree is expected to continue into next year as countries continue to create a hedge against geopolitical risk and diversify their reserves away from the US dollar. There is a good reason for countries like Russia and China to want to de-dollarize. The US has been known to weaponaries the greenback and used it as a foreign policy tool. By far, one of the most important considerations when evaluating gold's intermediate-term outlook is the trend of the U.S. dollar index. The dollar's dominant longer-term trend, however, is still up as shown by the fact that the greenback hasn't yet made a decisively lower low in several months. All of the factors that have lit a golden fuse under the yellow metal in 2019 are still in place as we race into 2020.
Global interest rates are at past lows. While the Fed left rates unchanged at the FOMC meeting, it is unlikely to raise short-term rates in 2020. The Fed is an apolitical body. As 2020 is an election year, the US central bank would not want to make any monetary policy moves that could impact the election. In September the ECB lowered its deposit rate to a negative 50 basis points and in November restarted its QE programme. The bottom line is that the stage is set for another leg to the upswing in the gold market that historically tends to start the year on a bullish note.
What are the levels expected for both gold and silver?
MCX Gold: Support 37,400-36,700 & Resistance 39,800-41,000
MCX Silver: Support 44,800-43,200 & Resistance 48,200-50,250
What should be the strategy of retail investors going ahead?
Buy on every dip. Since bullions have risen sharply (gold: 24% & silver 20%), we don't deny the possibility of a technical correction in prices. Having said that, January has always been positive for the bullion, at least in last 10 years, on eight out of 10 occasions, January has observed positive moves in the bullion. Moreover, on 31st January, Brexit officially will take place hence sentiment will remain on the bullish side.
Can silver top gold’s performance in 2020?
Silver is set to end 2019 with nearly 20% returns, again the highest returns since 2010. For the almost entire year, silver has followed majorly bullion market's trend as base metals have not performed significantly this year. Price of silver tends to move similarly to that of gold, especially when economic performance turns for the worse. During times of political turbulence and economic uncertainty, the prices of base metals, such as zinc and copper, drop due to the contracting industrial demand. On the other hand, the prices of silver and gold skyrocket, as investors usually cling to them to hedge the risks and strengthen their investment portfolios. With the decreasing amount of silver being mined annually, the metal is already in short supply above ground. Besides, increased industrial demand for silver is rapidly depleting the existing reserves. Adding the rising demand from international investors, the conditions are rather perfect to see gains in the silver price in the coming months and years.