Gold investment: After a good run in May, where is gold headed?

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Gold prices have been on an upward move and have registered strong gains during the month of May. In fact, the yellow metal has registered one of its best performances in the past few months, gaining nearly 8 per cent during the month. On May 31 gold settled at Rs 48,933 per 10 grams on the MCX, or 0.81 per cent higher over its previous close.

As the yellow metal inches closer to Rs 49,000, the question in every investor’s mind would be how much more steam is left in the precious metal. Will it move higher up and by how much? Will it cross Rs 50,000 soon?

May breach Rs 50,000 mark Experts believe that gold has good legs remaining and could cross the Rs 50,000 mark and move much higher in the coming months.

“On the domestic front, we expect the metal to rally towards the immediate targets of Rs 50,500, followed by Rs 56,500 and above over the next 12-15 months.” Navneet Damani, VP, Commodity Research, Motilal Oswal Financial Services said.

In the global market, on the COMEX, Damani believes gold is heading for a new lifetime high. “We continue to maintain our positive bias on gold for short to medium perspective targeting new lifetime highs towards $2,050 followed by $2,200 on the COMEX,” he said.

Vinit Pagaria, Head of Data & Research, StockEdge agrees that gold is showing strong upwards momentum. “Gold prices have been on the up move since the last couple of months and the strength is likely to continue in the medium term. Gold has taken excellent support in the $1,675-$1,700 zone and has now also sustained above the crucial $1,800 mark. It appears set to move towards $1,950 level, beyond which, a much larger up move could be in the offing,” he said.

Factors to watch out for So what are the factors that will determine driving gold price movement in the short to medium term?

Pagaria lists out several factors including inflation, dollar movement and developments in the cryptocurrency market as factors to watch out for. “Any significant increase in global inflation is likely to be a primary driver for gold prices and a further decline in real interest rates would push gold higher. Also, increasing concerns around acceptability of cryptocurrencies might have some impact on gold demand. The movement of the currency pair USD/INR would definitely be a key factor impacting local gold prices. USDINR is currently trading near the strong support band of 72.20-72.60,” he said.

Gold had a muted start in 2021 and had slipped substantially from the all-time highs that it registered in August 2020. However, the rising concerns over the pandemic and the stimulus measures by the central bank coupled with geopolitical tension and the fear of the Covid-19 pandemic provided a push to gold prices. “There are tailwinds which have lent a strong floor for the prices. Factors like rising inflationary expectations, rising debt, fear of the pandemic (especially on the domestic front), Central banks’ loose monetary policy , stimulus measures, Central banks’ increasing their gold reserve, trade war between US and China, geopolitical uncertainties will boost the overall sentiment for the safe have assets,” Damani said.