Chennai: Having provided 22 per cent return in 2019, gold prices are expected to touch Rs 44,000 per 10 gm in 2020. The metal is also likely to further extend its bull run to 2021.
In 2019, gold provided handsome returns of 18 per cent in dollar terms and 22 per cent in rupee terms. Gold prices were hovering around $1,284 an ounce at the end of 2018. Towards the end of 2019, they are trading around $1,515 levels.
In the Indian market, gold was priced Rs 32,000 per 10 gm at the end of last year and currently they are moving close to Rs 38,800 levels, providing 22 per cent returns in a year. The import duty hike also resulted in higher returns in the Indian market.
“We have seen gold making such returns after a gap of a few years. Gold is likely to sustain this momentum in the coming year as well,” said Himanshu Gupta, vice president and head of commodities and currencies research, Globe Capital.
According to him, in 2020 gold prices can move towards $1,650-$1,700 per ounce in the international market. In rupee terms, this can take gold to Rs 44,000 per 10 gm levels.
The macro-economic factors that have been supporting a bull run in gold in 2019 may not dissipate in 2020. The bull-run can further strengthen in 2021 as prices can move towards its record high levels touched in 2012.
The trade war between the US and China continued to build uncertainty around global economic growth in 2019. The IMF has made a downward revision of its global growth forecast for 2020 as it thinks that the trade war will affect the growth of key economies.
“Phase I deal delay between the US and China is keeping the buyers of gold interested,” said Jateen Trivedi, Senior Research Analyst (Com-modity and Currency) at LKP Securities.
A major factor deciding gold price movement in the past few years has been rate decisions of the US Federal Reserve. The US Fed, which held a hawkish stance at the end of 2018, went on to cut the interest rates thrice in 2019. This undermined the dollar index, which remained subdued for a large part of the year.
Also, the inversion of US bond yields in 2019 kept market worried about a likely recession.
In 2020, a trend reversal in the global equity market can also lend support to gold. “Though select equity markets did well in 2019, the corporate earnings do not support the rally much. Further, the presidential elections in the US can also lead to some correction in the US market... this can turn the market in favour of risk averse assets like gold in the second half of 2020,” said Gupta.
