Thursday, 23 June 2016

Gold can be you best friend for now

By Chiranjivi Chakraborty, ECONOMICTIMES.COM | Jun 24, 2016, 10.37 AM IST

Image result for gold newsNEW DELHI: The United Kingdom has decided to break its 43-year-old marriage with the European Union, sending global financial markets into a nervous breakdown. 

Risk assets from New York to Tokyo took a dive while gold is surging to a new three-year high. The precious metal hit a high of $1,362, surging close to 7 per cent on Friday morning. 

"If I was a trader, I would stay away from the market until we get some clarity. It's a very close call at the moment. If you look at the way the flight to gold has happened, it has given us a good barometer of the uncertainty," said Jonathan Barratt, CIO, Ayers Alliance. 

"You will find that people will, as a hedge, go into gold and I think gold will remain relatively high until we come up with a good conclusion to the whole referendum," he said. 

Navneet Damani, Associate Vice President, Commodity Research, Motilal Oswal Commodity, believes with Brexit now a certainty, gold can now go as high as $1,400. 

"In dollar terms, gold can rally towards $1,350-1,400 levels if we see a big risk-off trade after Brexit. In the domestic market, price levels should be around Rs 31,800-32,500," he said. 

Navneet Damani says that makes gold "the best placed asset in the current environment to protect investors from big potential swings in global currency as well as equity markets." 

Gold has already rallied over 6.47 per cent in June and 25 per cent so far this year after getting out of a four-year-long bear market. 

Although gold is yet to see the high of $1,900 seen in the aftermath of the sovereign debt crisis, experts say the yellow metal will see good days ahead due to financial turmoil and negative interest rate regime in most developed countries. 

However, Jonathan Barratt feels once clarity emerges on the exact impact of the Brexit, gold's current rally may peter out. "Brexit will see gold move higher, but once we get clarity as to what it actually means, gold may actually come under a little bit of pressure," he said.