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Informist, Wednesday, Feb. 19, 2025

 

By Sandeep Sinha

 

MUMBAI – The current bullish trend in gold will see prices moving towards $3,000 an ounce and, in an extreme scenario, to $3,100 an ounce, but they are likely to peak in March or April, after which the trend may start reversing, according to Jateen Trivedi, vice-president and research analyst at LKP Securities. The second half of this calendar year looks a bit dull for gold because the current rally will not extend much longer or higher, Trivedi told Informist in an interview.

 

He said domestic investors hoping to see gold touch the six-digit mark may have to wait another 18-24 months as the rupee will have to depreciate against the dollar beyond 90-92 levels for that to happen. Over the last five years, gold has appreciated at a compounded annual growth rate of 20%, so we can expect this level of INR 100,000 per 10 grams by early or mid-2026, Trivedi said.

 

Trivedi is more bullish on silver than gold as prices of the industrial metal have not reached their peak and there is positive build-up on the fundamental side due to demand from the automobile industry for electric vehicles and other industries. He expects an at least 15% rally in silver from the current level to INR 110,000-INR 115,000 per kg by June-end in the domestic market and $37-$38 an ounce on COMEX.

 

Trivedi does not see the Dollar Index rising above the 112 level from the current levels of 107. The Dollar Index is likely to drift lower in the second term of US President Donald Trump also, as it did in his first term, he said. He does not expect the rupee to fall below 90 a dollar and sees it consolidating in the 85.5-87.5 range in the first half of 2025.

 

Following are edited excerpts of the interview:

 

Q. What is your view on the current rally in gold prices? Do you think gold has any steam left to rise further? Alternatively, are there any concerns around gold?

A. Gold has not reached its peak. I expect prices to move towards $3,000-$3,050 an ounce or even to $3,100 an ounce in a very bull-case scenario. These levels were unthinkable around Diwali, because back then the target was around $2,800-$2,850 an ounce and on the Multi Commodity Exchange of India, we were looking at INR 85,000-INR 86,000 per 10 grams. But that has now been achieved.

 

After Donald Trump was re-elected as US president, his talk of tariffs led to uncertainty in the global market and led to a lot of gold purchases. This rally in gold might continue till there is an update from either China or the US. If either or both come out with a statement that clears the uncertainty, only then will this rally start reversing. I expect this rally to fizzle out if China enters into negotiations with the US, or if the US softens its stance on tariffs. That is the only trigger that will cause the rally to fizzle out.

 

Q. What is the timeframe for gold prices to reach $3,100 an ounce level?

A. We are in the initial stages of the new calendar year and I expect the bullish trend to hold in the first quarter. But the second half of this calendar year looks a bit dull for gold because this rally will not extend way too much on the higher side and is not going to be a rally like the last few years. I expect the rally to peak by March or April, and fizzle out in the second half.

 

Q. Do you see prices hitting the INR 100,000 level on MCX? If so, when?

A. I do not expect gold prices to touch the six-digit magic figure this year, maybe in 2026. I expect the mark to be breached in minimum one to one-and-a-half years and maximum two years, because for that rupee will have to depreciate against the dollar beyond 90-92 levels.

 

For domestic gold prices to reach INR 100,000 per 10 grams, prices on COMEX will have to rise another 15%. Going by the compounding average of 20% in the last five years in our domestic market, we can expect this level of INR 100,000 per 10 grams early 2026 or mid-2026.

 

Q. Have you revised your target for gold in 2025?

A. We at LKP set a 12-month target in Diwali. Last year, we set a target of INR 86,000-INR 88,000 per 10 grams for Diwali this year, which has already been achieved. We have just modestly revised it now to INR 88,000 per 10 gm because we do not want our clients to get stuck at very peak levels.

 

Q. The gold-silver ratio is hovering around 90. What does it indicate?

A. The gold-silver ratio historically peaks between 95 and 110. Around COVID-19, it had shot up to 120-125 but just for a few days. Every time the ratio reaches 88, silver outperforms gold on the upside or gold starts to correct more than the silver on the downside.

 

Q. Silver has been a laggard compared to gold. Do you see silver outperforming gold?

A. I expect silver to perform better in the first half of 2025 considering that gold is holding above $2,800 an ounce on the COMEX. Volatility will be there because of counter tariffs or interest rate decisions. If China announces any stimulus or trade related decision, the base metal market will start to outperform and silver will also benefit. Silver has not yet reached its peak, but there is positive build-up on the fundamental side due to demand from the automobile industry for electric vehicles and other industries.

 

Silver can outperform in the first half but can't say that about the second half because if the gold rally fizzles out, then it will be difficult for silver to stay higher. So, silver will rise maybe to INR 110,000-INR 115,000 per kg in the first half. On the COMEX, it will rise to $37-$38 an ounce.

 

Q. If there is a correction in gold, how much lower could the prices go?

A. If gold corrects from the $3,000 mark, I expect prices to touch $2,600-$2,700, because that is the level from where the rally began. I expect prices to fall to $2,650-$2,700 an ounce whenever the correction starts.

 

Q. Will that be a good level to enter for those who have missed out on this rally?

A. A healthy correction will be to $2,600-$2,700 an ounce, which will definitely be a good level to enter instead of now at over $2,950. Traders and investors should look for dips towards $2,600-$2,700 as an opportunity to buy.

 

Q. Crude oil prices fell after US President Trump held talks with Russian President Vladimir Putin over relations between the two countries and the Russia-Ukraine war. Do you think crude oil prices could fall further or stay at the current level?

A. Any positive development on the Ukraine front will lead to softening in crude oil prices. However, pickup in China's economic activity may limit the fall, as China is the biggest importer of crude oil. Going ahead, I expect West Texas Intermediate to trade in a range of $70-$80 per barrel.

 

Q. The Dollar Index is still hovering around 108 mark. Is there any upside room or could we see a correction?

A. When Trump won the presidential election, there was a buzz that the Dollar Index will rise to 115-117. But if we analyse Trump's first term in the White House, the Dollar Index showed some volatility initially, but later drifted to a low of 88. If history repeats itself, then the Dollar Index is unlikely to move higher. The index has not risen despite hawkish comments by Federal Reserve Chair Jerome Powell that the central bank is in no hurry to lower interest rates. I expect the Dollar Index to decline further and drift towards 100-98.

 

Q. Rupee recently made a lifetime low of 87.95. Do you see further downside in the rupee or upside in the near term?

A. I do not see the rupee crossing the 90-mark. I expect it to consolidate between 85.50 and 87.50 in Jan-Jun.  End

 

US$1 = INR 86.95

 

Edited by Ashish Shirke

 

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