Should you buy gold: Gold and silver lose their luster in 2021. Will they shine next year?

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NEW DELHI: After rising 30% in 2020, gold’s luster did not last into 2021. This is largely because of a strong US dollar, which historically has an inverse relationship to the bullion, and a fading safe-haven appeal, as the outlook for the global economy has improved although the inflationary phase has not been as ‘transient’ as central banks around the world had hoped. .

Silver was also hit during the year amid heightened volatility in industrial metals. Analysts are moderately positive on both precious metals counters for 2022 and a few analysts say they can still generate double-digit returns.

Gold, at Rs 47,895 per 10 grams today, is down 4.2% this calendar year from December 31, 2020, priced at Rs 50,005 per 10 grams. The yellow metal generated a return of 27.96% during the 2020 calendar.

“After modest losses in 2021, gold faces an equally difficult year in 2022 as the Fed (US Federal Reserve) and other central banks accelerated the process of monetary tightening to control price increases.” said Ravindra V Rao, vice president of commodities research. at Kotak Securities. “However, at the same time, rising inflationary pressures and signs of volatility in the stock markets may increase the attractiveness of gold. Gold may continue to stay in a wide range unless it does. There are new triggers, however, the general bias may be on the upside as investors seek alternative assets.

Sugandha Sachdeva, vice president of commodities and currency research, Religare Broking, says as long as the level of $ 1,680 an ounce holds for gold in the international market, it would be prudent to adopt a buying strategy in the event of a downturn. While the US labor market improved in 2021, the inflation trajectory was not “transitory”, as expected by the US central bank, she emphasizes.

Rising inflation could ignite gold’s appeal as a safe haven for wealth preservation after a long phase of consolidation. There is also a huge pent-up demand for marriage-related gold in the domestic market. Central banks are also accumulating the precious metal, Sachdeva says, and their gold reserves hit a 31-year high in 2021.

She advises investors to consider buying gold on declines to 46,800 to 46,500 rupees for 10 grams. She sees strong support for gold at Rs 44-500-45,000 for 10 grams and claims that Comex gold can reach the level of $ 1,970 per ounce in 2022, which translates to Rs 52,500 for 10 grams in domestic markets.

An ETMarkets.com survey of 13 brokerage firms found that analysts have advised 10-20% investments in gold as part of asset allocation in 2022.

Standard Chartered Wealth India According to Standard Chartered Wealth, gold does well in times of high inflation. If inflation turns out to be higher or lasts longer than expected, gold can serve as a portfolio hedge. “Additionally, we expect higher episodes of equity market volatility in 2022 given the transition to the mid-cycle. This may be partially mitigated by gold. Finally, our view of modest dollar weakness should eventually offer a longer-term pillar of support for gold, “he adds.

In the case of silver, global demand is expected to reach 1,155 million ounces by 2025, increasing at a CAGR of 2.98%. The global silver market will see demand hit 1.29 billion ounces this year, the first time it has exceeded 1 billion since 2015, according to the latest Silver Institute report.

Sachdeva says that $ 21 per ounce is the support for Comex Silver, and that works out to Rs 58,000 per kg. She recommends accumulating money around Rs 60,000 to 59,000 per kg area for a target of Rs 74,500 per kg ($ 26.50 to $ 27 per ounce worldwide) as long as support is maintained on a closing basis. The increased demand for green infrastructure and high investments in renewable energy could also increase the demand for silver, which is used in solar panels and electric vehicles. In addition, a surge in global inflation would also encourage buyers to buy silver, as it is relatively cheaper than other commodities.

Rao says silver suffered modest losses in 2021 amid heightened volatility in industrial metals. ETF outflows also showed weaker investor interest, as the outlook for industrial demand was mired in slowing manufacturing activity globally, he said.

The precious metal last traded at Rs 61,996 per kg, down 7.85% from Rs 67,281 per kg on December 31, 2020.

Silver may continue to struggle for direction as gold faces the challenges of Fed tightening expectations, while industrial metals may be tested by improving expectations of the supply and slowing Chinese economic growth. However, the long-term outlook for silver remains positive due to increased uses in the industrial sector and this may cause investors to accumulate the metal at lower levels, ” he adds.


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