Global focus is on which nations will recover faster and be above pre-pandemic levels and which will be the laggards. Growth rates in India and most nations in Asia are expected to rise very quickly and be at a historical high before the end of the year. It is this expectation and hope that is driving base metals, energies and stocks and bond yields higher and higher with passing of each day.
The current trend of all asset classes rising every day can continue for a few weeks to a few months. They will be vulnerable to large corrections anytime soon. There will be “V” shaped price move in stocks and base metals. It will be a touch and go “V” shaped price move. But the “V” will be very deep and scary. If you are on the wrong side of the trade, then all your stop losses will be hit.
Gold has already fallen. Silver is an under-performer. A global sell off in stocks (over the coming weeks and months) will not impact bullion price. I expect them to instead rise as people hedge against volatile stock markets.
Media reports suggests that Indian gold jewelry demand during the Valentine day has been way less than expectation. Young Indian prefer to invest in gold coins and other forms of physical gold instead of jewelry. Electronic items (mobile phones and laptop) as gifts have taken precedence over traditional gold and silver jewelery among the millennial. Gold and silver jewelry demand in India is changing in a big way. The so called cyclical jewelry demand patterns in India are limited to rural areas. Price elasticity is there in physical gold and silver. Even gold ETF demand is price sensitive. The young working people (under 30 years) are an inspiration to me over the way they save and invest. They want to invest in gold. They daily look at price trend to invest. They are not in a hurry to invest. Social media and whatsapp groups and telegram groups decide the precious metals investment strategy more than anything else for people of all ages in India.
What next for gold price? I am asking myself what will come first $1700 or $2000. As of now I expect gold price to rise to $2000 first. I believe that the global war against paper currencies (as reflected by the rise in bitcoin and crypto currencies.) will spill over to gold much sooner. The only risk to bullish short term gold price view, is a very sharp rise and a sustained rise in US ten year bond yields accompanied by equally low PPI numbers and very low CPI numbers. I will be very happy just in case gold price falls to $1700 and below as it gives me another opportunity to invest.
One needs to look for long term changes in demand side fundamentals in precious metals, base metals and energies. The current rally is defined by demand side bullish fundamentals as opposed to supply squeeze last year. Precious metals, base metals and energies will crash only if there is a sharp reduction in long term demand outlook.
COMEX GOLD APRIL 2021 – current price $1825.00
- Short term view: Gold has to trade over $1773.90 to rise to 1872.50, $1922.80 and $1974.60.
- Gold will crash only if it trades below $1773.90 in the next three weeks to $1731.80 and $1702.00.
- Two hundred day moving average at $1869.70 is the key long term resistance.