The year 2020 may be remembered as a year of gloom owing to the novel coronavirus pandemic, but metals across-the-board, both base and precious ones have shone like never before.
There has been a bull run across all metals both in the domestic and international markets with gold and silver hitting record high levels this year. Analysts say this upswing may continue into 2021, more so in the first quarter of the year.
Gold futures on the Multi Commodity Exchange (MCX) hit an all-time high of Rs 56,200 per 10 gram amid Covid-related uncertainty, before correcting from the highs.
Both in the domestic and international markets gold prices rallied over 20 per cent in 2020.
Speaking to IANS, Ravindra Rao, VP and Head of Research for Commodities at Kotak Securities noted that although precious metals have come down around 10-15 per cent from their all-time highs, the fundamentals still are strong indicating a return to the highs next year.
He noted that the stimulus packages announced globally, including the latest in the US would lead to inflationary concerns, which may in turn make investors flock towards safe-haven assets such as gold.
A weak dollar index is another major factor strengthening metal prices along low interest rates across major economies.
“Lower interest is also positive for gold. The US dollar index is continuously on a slide…so, that is also positive because commodities denominated in dollars go up. These are the factors…I think the bull-run in gold and silver is here to stay,” Rao said.
He added that in the first quarter of 2021 gold prices in the international market are expected to return above $2,000 per ounce and may also breach the record high levels in the year ahead, if not in the first quarter.
In the domestic market also, the yellow metal may test Rs 55,000-56,000 levels, Rao told IANS.
The February contract of gold on the MCX on Friday ended at Rs 50,064 per 10 gram.
Similarly, the March contract of Silver also closed on a subdued note on Friday at Rs 67,518 per kg. Silver futures have also corrected from the record high levels reached earlier a few months back.
During the year, silver prices were largely supported by supply concerns amid the pandemic along with a weak dollar.
Analysts say despite the current subdued trade, fundamentals are bullish which would trigger an upward movement in the precious metals going ahead.
Khsitij Purohit, Product Manager, Currency & Commodity at CapitalVia Global Research said: “Precious metals are supported by the weakness in dollar index.”
He was of the view that once the dollar breaches its support levels, both precious and base metals will move up.
Regarding base metals, Purohit told IANS that in the first quarter of 2021 all base metals will remain bullish. He noted that currently all the base metals are trading firm due to the robust demand globally, especially from Europe and China.
Rao of Kotak Securities said that base metals have been performing well because of higher spending on infrastructure.
Further, resumption of manufacturing activities across the globe has given a fillip to the prices of base metals.
The new mutant strain of Covid-19, however, poses threat to the base metal market, Purohit told IANS.
The December contract of copper on the MCX on Friday closed at Rs 611.40 per kg. The December contract of nickel on the MCX settled at Rs 1,287 per kg on Friday.
Similarly, the December futures contract of zinc on the MCX ended higher at Rs 220.90 per kg on Friday, while that of lead settled at Rs 153.50 a kg.
Purohit of CapitalVia said that copper futures are likely to reach around Rs 650 in first quarter of 2020, and that of nickel may rise to Rs 1,450, while zinc may reach Rs 240-245 per kg.
He anticipated that demand for lead would be largely higher than other metals due to growing demand for electric vehicles. Lead futures on the MCX may reach Rs 190 per kg.
Although uncertainties prevail over containment of the virus, health situation and the economic outlook at large, the market seems to be ready for the rally in metals to continue in months ahead.