A 250 basis point tax cut and improving economic conditions have put pressure on gold prices, in both the physical and futures market, as the yellow metal is trading down nearly 5 per cent from its pre-Budget price.
Some analysts believe the precious metal may lose some more as rising yields and better than expected success in vaccination drive will lead money out of the non-yielding bullion. However, low level buying and wedding demand may provide some support.
“The vaccination process is too swift. We have also seen better recovery in the dollar index and treasury yield, which has a negative correlation with gold. Until we do not see some softening of yield, we should not see upside in gold price,” said Vandana Bharti – AVP, Commodity Research, SMC Global.
In the international market, she believes that $1,770 should provide good support. In India, she said the short term target should be Rs 46,800 with ultimate downside target at Rs 46,000. If this target is achieved, this means gold will fall 3.5 per cent from current levels of Rs 47,600.
Any recovery in prices, which is less likely given the fundamentals, should be capped at Rs 49,200. Dealers believe increased demand for physical gold, Exchange Traded Fund (ETF) buying and exports will lend some support to prices in coming months.
