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Will gold continue to deliver high returns in 2021?

Sudhakar G
·3-min read

With vaccination beginning on January 16, and likely normalising livelihood and economy, Gold should beat other investment avenues. But that is a million-dollar question!

In 2020, Gold soared up to a peak of around Rs 58,000 / 10 g. With vaccinations having begun on January 16, can gold beat many investment avenues like stocks and property and generate the same magnificent income in 2021?

Also read: Why you must declare investments to your employer for tax benefits

The gold gain in 2020

Against Rs 39,119 / 10 gms on January 1, 2020, Gold (0,999 grade) rose to Rs 58,000 prior to closure at Rs 50,123 on December 31. At the beginning of 2020, the buyer who bought 100 grams of Rs 3.91 lakh gained 1.1 lakh in a year.

The 28% rise stemmed from a substantial 22% rise in 2019. How does Gold equate to stocks and property with returns?

Gold had the highest return in 2020 for all types of assets. It produced better returns than inventories and property. In the past year, BSE Sensex returned 15.75 per cent in contrast to Gold. In the second quarter of 2020-21, annual growth in the All-India Home Price Index (HPI) continues to slow down.

Global scene against Gold

The gold spot leads on with almost $1,900 an ounce. In 2021, claims Kotak Securities, a prolonged breakdown could be observed. The yellow metal can be advantageous for lower rates of interest worldwide and the gradual decline of the US dollar.

Also read: 6 documents you need to open a demat account

Will Gold rally continue in 2021, or not?

Central banks worldwide lowered their interest rate to nearly 0.0%. And financial institutions have pursued ambitious liquidity in the market policy.

As Damani claimed, all the measures taken affect the market and therefore increase the price of valuable metals. Worldwide, central banks global liquidity drive will substantiate significant support for continuing gold power.

Gold demand status in India

In the third quarter, total jewellery demand fell 48 percent to 52.8 tonnes, compared to 101.6 tonnes in the same quarter last year. Stimulus measures have produced liquid assets, and the US is expected to announce additional stimulus. Analysts also said ambiguity about recent developments in Covid vaccines endorses the gold rally.

Vaccine hopes and its related prediction for Gold

Almost everybody now hopes that the vaccine will help life return to normal in 2021. While this anticipation led to some price corrections, fears surrounding 2021 aren’t completely unfounded.

Pace and efficacy of international immunisation programmes are essential; if flare-ups occur, Gold remains strong. And it is well-appreciated that most of 2021, in the hope created by vaccine innovations, will be a convoluted journey from vaccine to vaccine. Creating COVID-19 vaccines in such a record few months is a commendable achievement, but manufacturing and distributing immune products is an expensive, time-consuming exercise for most of the world’s 7.8 billion.

Also read: Is India ready for expensive, imported electric vehicles?

In 2021 will gold prices stay bullish?

Analysts could increase prices by another 25%, measuring Rs 65,000 (per 10 grams) At Comex, going into 2021, price is expected to be extended to test a fresh all-time high of $2400-2500. There is also a feeling that with interest rates projected to remain high in developed economies, Gold will become more attractive than US Treasury bonds. Another factor is geopolitical instability worldwide, including US-China links and China-India relations. The resulting volatility in equity, credit and currency markets would cause a risk-off sentiment, boosting investment demand for comparatively safer alternatives like Gold, analysts say. The initial upward movement will be driven by additional fiscal stimulus from the US government. Other factors would increase investment demand and consumer demand from India and China.

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