More Stories

Informist, Tuesday, Dec. 17, 2024

 

By Sandeep Sinha

 

MUMBAI – The price of gold has established a solid base at INR 70,000 per 10 gm and Kedia Advisory does not foresee any breach below this level, said Ajay Kedia, director of the broking firm. "The yellow metal may deliver double-digit returns in the first half of 2025, with prices conservatively reaching $3,000 an ounce and INR 85,000 per 10 gm," Kedia said in an interaction with Informist.

 

While a correction may take place in the second half of 2025, Kedia does not anticipate a significant price drop. "Central bank buying, de-dollarisation trends, exchange-traded funds inflows, and geopolitical tensions will provide strong support to gold," he noted.

 

In India, Kedia has observed a notable shift in gold investment patterns. "Gold consumption and investment demand used to move in parallel," he said. "Now the younger generation prefers digital gold, mutual funds, and ETFs." The habit of gradual investing has returned, reducing the fear of missing out, he said.

 

Rising gold prices, which have surged 30% this year, have also affected consumer budgets. "Buyers are opting for lightweight jewellery," Kedia said. "In our country buyers have a value budget and not quantity budget."

 

The current weakness in silver is a golden opportunity for investors to accumulate the white metal, Kedia continued. He sees silver prices touching INR 140,000 per kg in the first half of next year on improving demand from China and green energy. Currently, the price of the most-active March silver contract on the Multi Commodity Exchange of India is at INR 90,331 per kg. The same-month contract on COMEX is at $30.74 an ounce.

 

The metal has strong support at $29.50 an ounce in the international market and INR 86,000-INR 87,000 per kg in the domestic market. However, because of extreme volatility, the price may correct up to $26 an ounce and INR 80,000 per kg in the worst-case scenario, Kedia said, but it cannot be sustained at that level for long.

 

"The gold-silver ratio is not sustainable above 90 on the 50-year timeframe, so ultimately it should come down and we could see the level of 72 on the lower side, which shows that silver will outperform gold," he said. "My first investment preference will be silver rather than gold," he added.

 

Asked about the outlook of crude oil, Kedia said Brent Crude would trade in the broad range of $74-$76 per barrel. In the worst-case scenario, it can come towards $62-$65 per barrel on the downside, he said. Any escalation in geopolitical tensions and a rise in demand could push Brent Crude towards $84-$85 per barrel.

 

"The global oil market will remain oversupplied as OPEC (the Organization of the Petroleum Exporting Countries) and allies gradually unwind production cuts, alongside rising output from the US and other producers," Kedia said. He noted that geopolitical concerns will persist in 2025, despite US President-elect Donald Trump's plan to de-escalate the conflicts in Ukraine and West Asia. "Even if tensions ease, crude prices will not crash, as central bank rate cuts will support demand," he said. According to Kedia, Brent Crude is unlikely to sustain below $70 per barrel, the level that OPEC and allies aim to maintain.

 

Kedia remains optimistic about base metals, citing demand from electric vehicles and global economic expansion. "While intermittent rallies are likely, I don't expect major price spikes or sharp corrections. The overall outlook is positive," he said.

 

For aluminium, alumina, and bauxite, Kedia anticipates supply tightness to persist in Jan-Mar due to delivery concerns surrounding Rusal, the Russian aluminium giant. "Post-COVID demand from the packaging industry remains strong, while bad weather and flooding in China are likely to reduce supply, especially in December and January. Chinese demand will also keep prices elevated," he said.

 

The recent strength in the Dollar Index is likely to continue, Kedia noted, as it is trading above its 200-day moving average on the daily chart. "The dollar (index) could inch towards 112 levels, particularly when Trump assumes office in January, bringing uncertainty around his policies and potential trade tensions," he said.

 

He added that a stronger dollar could weigh on commodities, especially agricultural ones. "There are concerns about La Nina, and we will have a clearer picture on the Indian Ocean Dipole's direction post-Jan. 21. If La Nina extends, Brazil could face drought-like conditions, which would impact commodities like cocoa, coffee, and sugar."

 

Kedia believes there is a chance that the government may relax the ban on futures trades in major agricultural commodities and allow a few to resume trading on the National Commodity and Derivatives Exchange. The Securities and Exchange Board of India in December 2021 prohibited exchanges from launching new futures contracts in soybean, mustard seed, chana, wheat, paddy, moong, and crude palm oil to cool inflation.  End

 

US$1 = INR 84.90

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Rajeev Pai

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2024. All rights reserved.