KOLKATA: Gold prices are likely to remain choppy during the upcoming festive season owing to the US presidential election, which is scheduled to be held on November 3. Analysts and bullion dealers said that though the broader outlook remains bullish for gold, international events in the run-up to the election may make the yellow metal prices volatile.
Volatile gold prices do not augur well for the jewellery trade, which has pinned its hopes on the festive season sales. “Prices should remain steady during the festive season so that buyers get some confidence,” said Anantha Padmanabhan, chairman, All India Gem & Jewellery Domestic Council.
On Tuesday, gold October future contracts at MCX were trading about 0.5 per cent up at Rs 50,409 per 10 grams. The dollar index traded weak, increasing gold prices ahead of the US presidential election debate and uncertainty over the US stimulus package.
Bullion has had a great run for much of the year, before taking a breather recently as market participants took some profits off the table. By the start of August, gold had given more than 40 per cent returns in 2020. Prices went up to Rs 56,000 per 10 gm in August. From September onwards, prices started falling and were down more than Rs 6,000 per 10 gm, pulling gold to below Rs 50,000 per 10 gm.
Navneet Damani, vice president (commodities) at Motilal Oswal said the recent volatility witnessed in gold prices had more to do with the speed of the move rather than the direction of it. The rally in gold prices was so steep it overshot the fundamentals, prompting investors to book profits.
Such volatility is normal when the market becomes too one-sided and even a small event triggers a large sell-off. At the same time the speed at which the prices are coming up from every such dip also reinforces investor interest in the metal.
“Election in the US is around the corner and some liquidity is definitely going off the table and moving towards other purposes. So some profit-taking in gold could be assigned to that as well. However, volatility is going to continue over the next couple of months as we approach the election,” said Damani.
The current situation of central banks across the world pushing unprecedented amounts of liquidity and the expanded government spending to keep the economy moving would cause significant stress on currencies as well as raise concerns of rising inflation.
“We remain bullish on gold, with a target of close to $2,450 by the end of 2021. In rupee terms it could be Rs 65,000-68,000 per 10 gm. In the short term till Diwali or year-end prices are likely to stay volatile with a positive bias and can inch towards Rs 53,000-54,000,” said Damani.
Prithviraj Kothari, president, India Bullion & Jewellers Association, said that though profit-taking has happened in gold, bringing down prices, the bullion will remain volatile till the results of the US election are announced. “The broader outlook remains bullish for gold,” he said.