NEW DELHI: Will gold remain a favourite with investors this year as it did in a year marked by the Covid-19 pandemic? Well, the answer to that trillion-dollar question will remain on top of the minds of bullion investors. Gold has had a bull run through 2020, with the yellow metal rising by as much as 40 per cent at one point in August. With some correction on the way where excess froth was spooned off, gold
ended the year gone by with a 20 per cent plus increase in value.
As fears over global economic recovery fade away, a repeat crazy bull run looks perhaps unlikely. However, several factors remain positive and a continuation of the run, albeit at a more modest pace, now looks more than likely. The biggest reason seems to be the $11 trillion pumped into the financial system by G20 nations as a stimulus to beat the after-effects of the pandemic. This money is swishing its way through the global systems and trying to find good, safe returns wherever possible.
With Gold forecast to rise, large investors will continue to favour it as a safe and yet lucrative place to park money. Adding logic to the punting on gold is the fact that most major central banks have slashed their interest rates to near zero per cent — a trend that is likely to continue in 2021. With the Covid stimulus being funded out of debt run up by governments concerned, there is little chance of rates being pushed up as these nations would like to keep their interest costs in check.
Among others, Credit Suisse expects gold prices to move up from the current $1898 upwards and average at around $2,100 an ounce in 2021, peaking at $2200 an ounce in July-September. It may be noted that Gold has always played out well in times of uncertainties and tensions as it is seen as the ultimate safe haven. Ambiguity related to the success rate of the Covid vaccine candidates and geo-political tensions cropping up between the US and China as well as between West Asian nations, are only expected to spur gold valuations in the months ahead.
“We continue to maintain our bullish view for the long-term perspective. Going into 2021, the price is expected to extend its bullishness to test a fresh all-time high level of $2400-2500. Whereas, on the domestic front, the price is likely to extend its gains by a further 25 per cent and test Rs 65,000-68,000 level,” said Navneet Damani-Vice-President, Commodities Research, Motilal Oswal Financial Services Ltd.