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Markets have been seeing a downside since the start of April 2021 as COVID-19 cases have been sharply rising. Many state governments have initiated restrictions on economic activities, such as night curfews, partial lockdowns, and a few have been planning to do the same. These measures are being taken as a mandatory step to limit the spread of the disease. The situation has been forcing investors to choose gold over other investment instruments.
Since investors have started showing interest in gold, the gold price has started seeing a surge from the beginning of April. Gold has gained Rs.3,000 per 10 gram over 20 days. As gold price is seeing a consistent hike over the period, investors wonder if this is the right time to invest in gold.
Industry experts state it is high time to invest in gold.
With the economy being unpredictable due to the pandemic, some lenders offer zero interest rates, and a few are even offering negative interest rates. Here, a negative interest rate policy refers to the savers paying the bank to store their money. The zero interest rate policy (ZIRP) and negative interest rate policy (NIRP) can result in lower bond yield, in turn, leading to a positive impact on gold.
Further, the chances of a second wave of the pandemic have the capability to make gold investments haven for your money.
The 10-year bond yield in India could break the record of the 16-year rising trendline in March 2020 at 6.30% and traversed until 5.688%. The move in the last year re-tested the breakout level of gold. This is considered the best entry as per the risk-to-reward ratio. The southward slope indicates that the yield is likely to fall after retesting the breakdown.
Technically speaking, gold is in a sweet spot right now. The 17 weeks time cycle on price action marks the beginning of fresh momentum. The recent bottom of $1,673 is expected to rise to the target level of $2,500, which is approximately Rs.65,500 per 10 gram in India in the days to come.
For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in
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