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Gold crosses Rs 49,000/10 gm-mark: How should you trade it?

Gold crosses Rs 49,000/10 gm-mark: How should you trade it?

26 May 2021

NEW DELHI: Domestic gold prices crossed the Rs 49,000 per 10 grams mark on Wednesday as the dollar and US bond yields remained at low levels, making the yellow metal cheaper for holders of other currencies.

Gold prices have been on an uptrend for a while now. After hitting a low of Rs 44,100 at the end of March, gold futures surged to a four-month high above Rs 49,000 per 10 grams, taking their gains to more than 11 per cent in two months.

Analysts remain upbeat and believe the prices will rise further in the coming days.

“The rise in the yellow metal has been on account of the fall in US Treasury yields and a softer US dollar, which pushes up the gold prices. The commentary by the Federal Reserve on rising inflation has also helped gold prices. The dollar index is currently at a four-month low,” said Nish Bhatt, Founder and CEO, Millwood Kane International.

“The current scenario combined with the rising number of cases due to the second wave of the pandemic will lead to investors turning to safe havens, which will aid a further rally in gold prices,” he added.

Gold crossed the Rs 49,000 mark in the spot market as well. According to the Indian Bullion and Jewellers Association, gold of the highest purity was sold at Rs 49,105 as of Wednesday afternoon.

Analysts say the demand for gold has been good. The RBI is currently auctioning the second tranche of the Sovereign Gold Bond scheme. Investments in gold ETFs have also increased. Platforms providing investment in digital gold have also reported higher sales.

In the short term, prices may hover in a range and any upside may depend on if the counter holds the Rs 49,000 level. Rahul Gupta, Head Of Research- Currency, Emkay Global Financial Services, said the yellow metal has continued to show strength and its safe-haven demand is likely to remain intact in general.

“While the US dollar index is struggling to extend recovery moves, MCX gold has hit the higher end of the range around Rs 49,000, a further upside is possible only if prices hold on to these areas for a few sessions. Else, a correction towards Rs 48,000-47,500 should be seen,” he added.

Even in the international market, gold prices continue to trade higher, as the yellow metal breached the physiological level of $1,900 to hover around four-and-a-half-month highs.

“The broader range on Comex gold could be between $1,870 and $1,920, and on the domestic front, prices could hover in the range of Rs 48,800-49,360,” said Navneet Damani, VP – Commodities Research, Motilal Oswal Financial Services.