Nippon India Mutual Fund has warned of potential near-term volatility in both gold and silver, citing factors such as an oversold dollar, unexpected inflation spikes, or prolonged risk-on phases in equity markets. The mutual fund manager’s cautionary note comes amid recent fluctuations in precious metal prices influenced by various global economic factors.
Gold prices experienced intraday lows, with prices hitting Rs 62,400 in India and hovering around $2,033.85 per troy ounce in the international market. Simultaneously, silver witnessed an intraday low of Rs 70,776 on the MCX, with an international market price around $22.58 per troy ounce.
ICICI Securities anticipates that spot gold might encounter resistance near the $2045 level, potentially sliding towards $2020 due to a strong dollar and rising US treasury yields. The dollar has reached an eight-week high following a robust US jobs report, diminishing expectations of an imminent interest rate cut by the Federal Reserve. Federal Reserve Chair Powell’s indication that policymakers might wait beyond March for a rate cut, pending more economic data, further bolstered the dollar.
Raj Deepak Singh, an analyst, remarked, “MCX Gold April price is likely to face a hurdle near the 62,850 levels and slip towards 62,200 levels. MCX Silver is expected to follow gold and slide further towards 70,300 levels as long as it sustains below 71,700 levels.”
Vikram Dhawan, Head of Commodities & Fund Manager at Nippon India Mutual Fund, emphasized that a correction in gold prices might attract central bank buying and physical purchases from China in the short-to-medium term. Dhawan sees a compelling case for gold even at $2,100/oz levels, highlighting gold’s historical performance during periods of acute equity market volatility. He suggested that investors overweight on equities consider gold as a hedge or diversification through exchange-traded funds (ETFs).
Dhawan finds the fundamentals for silver attractive, noting its role as a proxy for green technology in solar, electric vehicles (EVs), 5G, and high-end electronics. He recommended systematic investment plans (SIPs) as prudent investment approaches for both gold and silver under the current market circumstances.
Despite recent fluctuations, global central bank gold reserves, reported via the International Monetary Fund (IMF) and other public sources, increased by a net 28 tonnes in December. Emerging markets continued to dominate central bank purchases during the same period, indicating sustained strength in buying.
Investors navigating the precious metals market are advised to stay vigilant in the face of potential short-term fluctuations while considering the long-term appeal and diversification benefits that gold and silver historically offer.
