Vandana Bharti, AVP, Commodity fundamental reserach, SMC COMTRADE LTD
, in an exclusive interview with Ajeet Kumar
explains extensively the current trends in the gold market, downside risks and price outlook.Q. Will current downturn in gold prices be sustainable?
The Bullion complex can witness prolonged weakness amid fundamental factors like recovery in US, China and other important economies, along with central bank giving an indication that it will rein in its unprecedented stimulus program. Gold on COMEX may head down towards the level of USD 1350.Q. Will 2013 be the bear market for gold?
So far, we have seen decline of more than 15 percent in gold after a decade of long bull-run. In recent days, Dow Jones has witnessed its historical high and if equity market continues to perform well then investors may take out money from safe havens, buying avenues and parking it in riskier assets. In days to come, if this phenomenon continues, gold prices may witness sharp correction, which was on a massive bull-run. Q. Have all factors underpinning the gold secular bull already been factored?
It will be too early to say that all positive fundamentals have already been factored into gold prices as euro zone is still not out of the woods and till now people carry less faith in currencies. Some economic indicators such as crude consumption are still showing some weakness in the world economy. Hence any weakness in economic indicators may stimulate safe haven buying in gold. Q. What range do you expect gold to trade in through the first half of 2013?
It should move in a wide range of Rs 24500–29000 in MCX whereas in COMEX it should move in range USD 1330-USD 1450. Q. What are the three main downside risks to gold right now?
Return of confidence in equity market, some important improvement in economic indicators and at the same time a fear that eurozone members might be forced to sell gold to raise part of the funding are three biggest downside risks to gold right now. Investors have continued to cut exposure to gold, with total holdings at the world’s major bullion gold-backed ETFs falling to their lowest since early 2012. Holdings of the largest fund, New York’s SPDR Gold Trust, fell a further 2.1 tonnes, or 67,710 ounces on last 11th March, 2013. Q. What are the three biggest upside triggers to gold right now?
High inflation, expected physical buying ahead of the marriage season, especially in Asian countries and concern over euro zone are three biggest upside triggers to gold at the moment. Q. Is the yellow metal still a long-term investment?
Gold is still good for the purpose of long-term investment, especially after the recent dips. We can’t deny that the health of world economy is still shaky and many countries are struggling to achieve normal growth amid high inflation. Hence, it is still advisable to put three-four percent of your portfolio in gold.Q. Is a deeper retracement or a rebound ahead for the yellow metal?
Other assets have become increasingly more attractive as the growth outlook is improving. There are fears in the market that some central banks may sell gold to raise part of the funding. These factors may limit the upside of gold in 2013.