Gold may slip to Rs 44,200; better opportunities in silver, natural gas

NEW DELHI: The US Federal Reserve’s announcement to start tapering its bond purchase programme “soon” and the probability of earlier-than-expected rate hike have come as a big blow to bullion investors.

In its policy statement on Wednesday, the US central bank said it could start paring bond purchases as soon as November and that half of the Fed officials were ready to raise interest rates next year in response to inflation. This could increase the opportunity cost of holding the non-yielding bullion.

Gold futures are down 0.72 per cent at Rs 46,337 and silver futures are down to Rs 60,670, slipping 0.83 per cent on Thursday. But this may just be the beginning, say analysts, who project gold hitting as low as Rs 44,200 level soon.

“Resolution of the Evergrande crisis, and talk of tapering and early rate hike have increased risk appetite of investors, negatively impacting gold,” said Vandana Bharti, AVP, Commodity Research at SMC Global.

She believes the yellow metal would likely remain rangebound in the short term, trading in Rs 46,700-45,800 range. Bharti said it would be better to trade in base metals and energy or rather in silver. The white metal can jump from current levels, she said.

The receding risk over the Evergrande crisis in China has again made base metals attractive. There is some supply tightness in copper. Bharti’s choicest pick is natural gas, which can see buying at current levels.

For the past couple of months, the broad trend in bullion has been negative. Gold is down by nearly Rs 10,000 from its all-time high levels and down about Rs 4,000 from Rs 50,000 level it hit in June. In the international markets, gold has declined over 7 per cent year to date.

Other analysts are also negative on gold and have deeper target levels. Hareesh V, Head Commodity Research at Geojit Financial Services, said chances are gold would fall to Rs 44,200 level as the fundamentals remain on the weaker side. However, the movement will be choppy rather than unidirectional.

“Try to buy on dips and not at the current level. It would be ideal to wait. If the rupee strengthens further, gold can crash more,” he said.