Will gold price breach lifetime high?

Omicron crisis: Gold price February future contract on MCX (Multi Commodity Exchange) on Friday shot up 524 per 10 gm and closed at 47,925 per 10 gm levels, logging 1.11 per cent intraday gain. This sharp rise in the yellow metal has fueled speculation about bullion re-emerging as investors’ haven in the wake of Omicron virus concern. According to commodity market experts, rising global inflation, rupee depreciation against the US dollar and industrial demand for gold and silver are already creating demand for gold and silver. So, the gold and silver price may further scale northward if the Omicron virus cases continue to rise further for longer period of time.

Speaking on gold price outlook on Omicron virus concern; Amit Sajeja, Vice President — Commodity Research at Motilal Oswal said, “There is a concern about the mutations in the Omicron virus and it needs further research to understand how much of an impact it can have. Gold price is likely to find support on dips due to this new uncertainty and a short covering move towards $1830 per ounce could be seen in next 3-4 weeks. However due to recent hawkish stance adopted by the US Fed, immediate upside too could be limited.” Amit Sajeja of Motilal Oswal said that by end of December 2021, gold price in spot market may go up to $1835 per ounce levels whereas on MCX, the yellow metal may go up to 48,800 to 49,000 per 10 gm.”

The Motilal Oswal commodity experts said that gold has strong support at $1760 per ounce levels and currently it is oscillating around $1775 per ounce levels where risk-reward ratio (1:3) in gold is very high. He said that in next two to three months, gold price in spot market may shine up to $1,915 per ounce levels. He expected more rally in gold in comparison to silver as rupee is also expected to depreciate further against the US dollar.

On triggers for gold price rally; Ravi Singh, Head of Research & Vice President at ShareIndia said, “Gold prices are currently in a choppy zone due to the ambiguous fundamentals post-spread of Omicron virus. The early tapering by Fed to control inflation is somehow riding the gold sentiments among the traders who are waiting for the WHO guidance on Omicron virus to have a better understanding of the severity. Technically, gold price is taking support at 47,000 to 46,800 levels and seems bullish for the target of 49,000 in immediate short-term. If the outbreak of Omicron virus widespread then high volatility and demand for safe haven may push gold to 52,500 per 10 gm levels.”

On how much impact Omicron virus will have on gold price; Abhishek Chauhan, Head of Commodity & Currency at Swastika Investmart said, “Omicron virus has spread in so many countries and due to its increasing influence, the possibility of strengthening the safe-haven demand may increase. The cases of Omicron have also been found in India, as infected people had no previous travel history, due to which it is estimated that the speed of its spread is rapid. If the effect of the virus increases in the coming days, then it can support the price of gold. As of now, there are no more fatal consequences, but it is capable of slowing down the pace of the economy, due to which the demand for investment in precious metals may increase.”

However, Abhishek Chauhan said that gold prices may remain under pressure for a while as US Fed has indicated that asset shortages and interest rate hikes may accelerate earlier than expected to ease inflationary pressures. Meanwhile, US data released on Thursday showed 2,22,000 initial jobless claims were filed throughout the week, better than expected. As moving against gold, the dollar remains strong while US bond yields remain volatile.

“The current situation of the pandemic may support Gold prices while the effort of central banks’ to control rising inflation may keep the upside limited for gold. However, the technical chart shows that Gold prices may test 50,000 to 52,000 levels in a few months,” concluded Abhishek Chauhan of Swastika Investmart.

So, after the outbreak of Omicron virus, gold price is expected to give sharp upside movement and it may go up to 52,000 per 10 gm levels in few months. But, whether it would be able to break its lifetime high of 56,191 per 10 gm on MCX, much depends upon how Omicron virus pangs out in next few weeks.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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