The government cut import duty on gold in the Union Budget and since then we have not seen domestic prices go up in equal measure as their international counterparts. Is there a link?
Yes gold has been making highs in the international market but in the domestic market it has not increased due to the cut in custom duty and is only playing a catch-up game. The finance minister announced a reduction in BCD (Basic Customs Duty) in Gold and Silver from 10% to 6%. Adding 5% of the AIDC (Agriculture Infrastructure and Development Cess), which remains unchanged, the total import duty on gold and silver has been reduced from 15% to 11%.
We have seen gold remaining in weak territory for week’s now. Do you see the situation for bullion improving in the near term?
Yes, in the short term, we may see some consolidation and correction in gold, but overall, our view remains bullish, and we believe the price of gold is likely to move higher towards $2,560/$2,595 levels from its current level, with strong support at $2,465/$2,433. By when do you see it testing the 75k mark and what is the outlook for the year?
In domestic markets, gold prices are likely to test the Rs 75k mark within 2 or 3 quarters, as the current environment favours bulls. Geopolitical uncertainties, substantial global ETF inflows, the Fed nearing a pivot, and a lower dollar index all continue to support the bullish trend in gold. How much is the year-to-date returns of gold and silver?
In domestic markets, gold near-month future has given a return of around 13.50%, while silver near-month future has delivered a return of around 13.80%. In the international market, spot gold is up by more than 21.0% so far this year, and spot silver surged around 24.0% on a YTD basis.
What should investors and traders do with gold?
We believe that investors should stay long-term in gold and use minor corrections as a good buying opportunity. Investors can allocate 15% to 20% of their portfolio towards gold. For traders, we recommend taking a long position in gold futures around 71350-71400, with an upside target of 73000, and maintaining a stop loss at 70580.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)