By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all

REASONS BEHIND RALLY TOWARDS $2450

• Safe-haven buying by speculators around the world amid escalating Middle East Geopolitical tensions between Iran-Israel and US-China trade war.
• Record Central Bank buying for diversification and de-dollarisation trend from the OTC market
• Portfolio diversification and increasing allocation in Gold by Ultra HNI Investors
• Chinese gold rush through high paper trading by speculators in far-month future contracts at the Shanghai exchange.
• Expectations of Debt crisis or Recession going forward, due to alarming high levels of US Fiscal Debt and Trade disruptions
• Switching of capital after profiting from Equity, Commodity and Cryptocurrency markets
• Expectation of monetary easing around the world, especially from the FED expected to cut interest rates starting from September

 

International Gold Weekly Chart

 

SHORT-TERM VIEW (1-2 MONTHS)

Gold prices have corrected $100 due to the Fed’s cautious stance on monetary policy and the expectation of prolonged high interest rates. Technical indications point to probable dips going forward, possibly followed by corrective recoveries.

$2300 (~ Rs 70400) is neckline support of Double top formation of Gold around $2450 (Rs 74400) in the short-term time frame. Gold prices can correct towards this support and consolidate for a while, before rising higher.

But if prices breach this support, we could see an extended sell-off towards $2150 (~ Rs 65000). The probability of such an occurrence looks dim unless a few negative triggers emerge in the market.

 

MEDIUM-TERM VIEW (5-6 MONTHS)

Any correction or dips which is coming along the way in the next 1-2 months, should be used as a buying opportunity for the target of $2500 (Rs 76000) by the year-end as overall fundamentals as discussed earlier are very bullish for Gold.

Those who are under-allocated in Gold as a financial investment should try to diversify at least 15-20% in Gold and Silver, for higher risk-adjusted return in the portfolio.

 

 

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