Gold crossed the mark of Rs 60,000 for the first time this week. It rose following global uncertainty due to bankruptcy issues faced by foreign banks such as SVB, Signature Bank and Credit Suisse. Will the yellow metal continue to rise? Is silver the better option to park your money given gold prices have already shot up? Navneet Damani, Head Research Commodities and Currency of Motilal Oswal Financial Services in conversation with Sakshi Batra of BTTV tells what is really next for the gold prices from here and whether you should silver at this point of time.

BT: What is leading to this kind of rally in gold prices?

Navneet Damani: The rally is not a major surprise. We’ve been bullish on gold for quite some time now. It all started with the end of the COVID crisis and the easing of monetary policy then the support was led by Ukraine and Russia war. Now what is happening in the last three months is that prices that shot up by $350. We saw the dollar index correcting from 115 levels to 100 levels. That’s about a 15 per cent correction from the peak. 

Secondly, we saw that China reopening its doors, just to remind you China is a big importer of gold. They have been almost working in a shut-door environment for the last two years. And the demand is likely to be pretty robust as and when the market gradually opens up. 

Chinese by nature have been bargain hunters. And when prices were low, they started to capitalize on this moment. Also, to top it up, we saw that the financial crisis has started to gear up over the last couple of months. We’ve seen a couple of major announcements of banks that have been under stress. Inflation has been pretty sticky. Even after 400-450 basis points of a rate hike in the last year inflation continues to over around 6 per cent mark in the US. So that’s been very sticky. We have the Fed meeting where we are expecting between a no rate hike possibility to a 25 basis rate hike possibility. It has to be very interesting how the market behaves. What is the commentary, which is coming in? What is their stance for the next couple of meetings? And that is what is likely to drive the way forward for gold prices?

BT: What is your expectation this time around from the Fed?

Navneet Damani: On one hand, you have very sticky inflation. And on the other hand, you have a financial crisis, which is largely in place because of successive rate hikes by the Fed. In nowhere in the last probably 100 years, we’ve seen about 450 basis point hikes in such a short span of time, and that is what has caught the banks off guard and is kind of having a very strong hand on their balance sheet. I think inflation is sticky and could continue and the Fed could continue to maintain a stance on inflation in the next couple of quarters also. But at this point, the focus largely is going to be how to prevent these banks to come under stress and how best they can manage or mitigate and stay out of this crisis. So the inflationary concerns are going to take a step back and primarily, the focus should be on saving banks or probably mitigating the risk that the regulators are facing at this point in time. 

But having said that, for the pent-up for gold, I don’t think there are many catalysts at this point. Most of the tailwinds have already played out and gradually some of them are likely to become headwinds. So if you asked me to cut the long story short, do I expect $2,200 or 10 per cent rally from here? I don’t see that happening in the near future. 

BT: What kind of prices do you anticipate for gold in 2023, both in INR terms and in US dollar terms?

Navneet Damani: On the dollar front we have already seen $2,000, we expect $2050 to $2070, where the prices can go up. On the domestic front if the rupee continues to remain around Rs83-84 levels where it is today, then prices on the domestic front could be in the range of Rs 61000-Rs 61500. From an investment point of view, the risk-reward doesn’t favour those who want to invest in gold at this point in time. Let’s wait for a healthy correction. Maybe a couple of quarters is where I see the correction. And that’s when investors should look to re-enter the market.

Is it a good time to invest in gold now? What about those who missed the bus?

Navneet Damani: Well, if you miss the bus, then so be it. But do not chase the bus. You have probably an accident waiting around the corner so better to switch to another asset class probably equity in the near future could give you some reasonable returns. Silver is also a very good bet at this point in time. I think gold vis a vis silver, I will still put money in silver at this point in time. 

BT: What about people who had actually bought at the bottom and at this point in time they may be interested in selling their gold at Rs 60,000 or so? What should those people do?

Navneet Damani: Well, you have no date time to sell gold. I think before the Fed meet starts probably or market tops out over the next say probably one week or so. It’s a good opportunity. If you get Rs61,000-61 500. I don’t see that they will be holding on for a long time and it is better to exit and wait for better levels to re-enter.

BT: You’re more bullish on silver than gold at this point in time. What kind of levels can one expect in 2023? 

Navneet Damani: Ever since it was around Rs50,000-52,000 mark, we’ve been having a positive stance in silver and we’ve been issuing reports targeting Rs75,000 and gradually target towards Rs84000 levels also. So our bias continues to remain positive and we have seen that silver has not performed in the last run-up or silver has not performed as gold has done. So my stance would be that one could wait for a reasonable dip and once that happens, I want to start accumulating silver. The first target would be about Rs 80,000 and then followed by Rs 84,000. That’s a clear 15 per cent to 18 per cent upside from the current levels.

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