Risk of near-term volatility in both gold and silver, says Nippon India MF

There may be a risk of near-term volatility in both silver and gold from an over-sold dollar or an upside surprise on inflation or an extended bout of risk-on phase in equity markets, according to Nippon India Mutual Fund. 

Gold prices today hit an intraday low of Rs 62,400. In the international market, prices hovered around $2,033.85 per troy ounce. Meanwhile, silver hit an intraday low of Rs 70,776 on the MCX. The price hovered around $22.58 per troy ounce in the international market.

Spot gold is likely to face the hurdle near $2045 level and slip towards $2020 level amid strong dollar and surge in US treasury yields, as per ICICI Securities. Dollar moved north to an eight-week high as robust jobs report from US ruined any expectations of a near term interest rate cut from Federal Reserve. Additionally, US Federal Reserve Chair Powell signalled that policymakers would likely to wait beyond March to cut interest rates as they want to see more economic data to assure that price pressure is ebbing.

"MCX Gold April price is likely to face hurdle near 62,850 level and slip towards 62,200 levels. MCX Silver is expected to follow gold and slid further towards 70,300 level as long as it sustains below 71,700 level," said Raj Deepak Singh

"Any correction from here on may bring in central bank buying and physical buying from China in the short-to-medium term. For long-term investors, there is a case for gold even at 2,100 $/oz levels. Historically gold has performed well at times of acute volatility in equity markets as per historic data. Whilst there is neither a forecast nor even a suggestion for same to happen but investors overweight on equities may want to consider gold as a hedge or diversification through exchange traded funds," said Vikram Dhawan, Head Commodities & Fund Manager Nippon India Mutual Fund.

Reported global central bank gold reserves, via the IMF and publicly available sources, rose by a net 28 tonnes in December. Higher gross sales (12t) were outweighed by gross purchases (41t), highlighting the continued strength of buying.

Central bank purchases in December 2023 continued to be dominated by emerging markets.

Dhawan believes fundamentals for silver are appealing, and it is also a proxy for the green tech, being used in solar, EV, 5G and high-end electronics.

Some of the prudent ways to approach gold and silver investments under current circumstances appear to be through SIPs, he added.