Commodity Talk: 2 reasons why July could be an inflection point for gold. Accumulate, says Augmont's Renisha Chainani
ANI
Traders should ideally be higher-risk traders; staggered buying; trailing-stop losses are an option.
July could be a critical inflection point for gold for two reasons - one is Trump's tariff pause ends and second will be the July FOMC where the US Federal Reserve could signal if it would begin the rate cut cycle, says Renisha Chainani, Head - Research at Augmont . For now, he suggested accumulation on dips around Rs 90,000–Rs 94,000, with a view of holding over the next 12-18 months.
Q: Gold has been trading in a range for quite some time and has reclaimed the Rs 1 lakh mark (physical markets). What is the near to medium-term outlook?
Gold's outlook in the near to medium term remains constructive. The retrieval of Rs 1 lakh/10g in physical markets is a sign of strength in underlying demand. While prices have consolidated in the past few months alongside mixed global cues, important drivers, such as sticky inflation, central bank buying, and geopolitical tensions, are providing support.
Gold could be in new high price test territory if global interest rate cuts come through by H2 2025. A range of Rs 94,000 – 1,05,000 seems plausible in the next 3 – 6 months.
Q: While there is no clarity on the contours of the Trump tariff deals US is making with other countries, do you think the real impetus in bullion would come once the July pause ends? Is it time to use dips to accumulate gold?
Sure, July could be a critical inflection point. If the US Fed signals that we are about to start a rate cut cycle, then real yields could soften—benefitting gold. Any resolution or escalation in trade or geopolitical tensions can also provide a trigger. For the now, I suggest clients consider accumulating on dips, and ideally the dips around Rs 90,000–Rs 94,000, with a view of holding over the next 12-18 months.
Q: What is the bull and bear case for gold and silver in 2025?
Bull case:
Fed rate cuts and weaker dollar
Continued central bank buying
Persistent geopolitical risks
Rising demand for silver in green tech and EVs Bear case: Rapid decline in inflation may push real yields up
Strong equity market rotation out of safe havens
Reduced industrial activity may weigh on silver Q: Do you think gold will outperform equities in 2025, and if so, should one increase portfolio allocation?
If economic uncertainties persist or recessions hit and the Fed starts lowering in 2025, gold could outperform equities. Equities could remain volatile in 2025, while gold, as an asset class, will bring stability to a portfolio. You should consider an allocation increase to a modest 10-15% from a current 5%. Gold is worth a hedge and upside play on uncertainty.Q. Gold-to-silver ratio is at its highest point—does silver make a more compelling case than gold?
Yes definitely, silver does look more attractive on a relative basis. The gold to silver ratio above 85 is historically indicative of silver being undervalued. There are strong long-term tailwinds from solar and vehicles, and industrial recovery has begun. In most scenarios, silver should offer better percentage returns. Under the premise that the bullish macro plays out, silver is riskier, but offers more reward potential.
Q: What should be the trading strategy in gold and silver?
Gold: Add on dips below Rs 95,000 | Medium target is Rs 1,05,000+. Look to use ETFs or Digital gold for risk-managed exposure. Silver: Buy on correction back towards Rs 95,000/kg. Carry the upside potential as far as Rs 1,20,000/kg in 2025. Traders should ideally be higher-risk traders; staggered buying; trailing-stop losses are an option. Keep in mind, both metals should be considered as part of a wider diversification strategy rather than be considered a short-term trade.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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