Gold may touch Rs 52,000, silver Rs 75,000 in next three months: Here's why

The commodity markets have been volatile lately owing to multiple fundamental factors from across the globe such as the central bank’s monetary policies, inflation data, economic growth outlooks and concerns linked to Covid delta variant, among others.

Gold and silver

The precious metal segment especially gold prices have witnessed a bounce back from the lows of $1,750 to $1,830 per troy ounce now in the international market and to Rs 48,450 per 10 grams at MCX on account of Fed’s accommodative stance with regards to their monetary policies and uncertainties linked to US job market and the new Covid delta variants impact in the medium term. The lower ten year US treasury yields are also supporting gold prices.

Expectations on pick up in investment demand from ETF and central banks may drive the prices in the near future as a part of diversification strategy. We expect the yellow metal prices to touch levels of Rs 49,500 in the short term and Rs 52,000 per 10 grams in the next three months. Silver on the other hand is also expected to improve from current levels of Rs 69,500 per kg to levels of Rs 75,000 per kg in the next three to four months, backed by loose monetary policy by most central banks.

Crude oil

The energy basket dominated by crude oil has been volatile for the last six months and the prices have surpassed $70 mark at NYMEX and are able to hold these levels backed by improved demand forecast by OPEC for this year and supply concerns over a disagreement among OPEC+ nations on relaxation of production cuts of about 10 mn barrels implemented last year.

At MCX, crude oil prices are trading around Rs 4,350 per barrel and witnessed a fall recently as UAE and Saudi Arabia reached to a compromise on improving UAE outputs in the near future. However, the positive global equity markets, loose monetary policies by central banks and vaccination drives are expected to keep the demand up in the near term making crude oil as a good buy on dip opportunity.

We expect the WTI Crude oil prices to touch $80 per barrel in the next 3 months at NYMEX and Rs 5,800 a barrel at MCX.

Base metals

Industrial metals corrected from multiyear high levels recently backed by improved dollar and measures from china to curb the price rise by releasing state inventories in the market. The prices, however, are finding support from lower inventories outside LME warehouses by almost 10% and improved demand forecast in future for Copper and Nickel among the base metal pack. The accommodative stance by central banks will support base metals prices in the near term backed by the weakening of the USD. China recently reduced cash holding limits for its banks to support the manufacturing sector and is seen as positive news for base metals.

We expect copper prices to touch Rs 760 in the near term and can be bought at around Rs 725-730 levels. Nickel is another metal showing potential with the expected rise in demand for the battery manufacturing sector for electric vehicles in near future and may touch levels of Rs 1,450 in the near term and can be bought in the range of Rs 1,380-90 levels in MCX.

Agri commodities

Agri commodities are also volatile with stock limits imposed on pulses led Chana prices down below the minimum support price trading around Rs 4,750 per quintal levels, however, we may witness a short covering in prices near Rs 4,600 levels and can be a decent buying level targeting Rs 5,000 per quintal again in three to four months. Edible oil prices are improving after a pullback in prices due to duty cuts and improved imports. The global weather concerns and demand from China will keep the prices UP in the international markets supported by expected biodiesel demand from the US for palm oil. Cotton prices may hover around Rs 25,000 per bale supported by decent local and international demand. The monsoon progress shall decide the future course of agri commodity prices as we move ahead.

(The writer is head-commodity and currency, Axis Securities; views expressed are personal)