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Informist, Tuesday, Feb. 25, 2025

 

By Sandeep Sinha

 

MUMBAI – Gold prices may consolidate for a while as the market waits for more clarity on US President Donald Trump's tariff policies, Pranav Mer, vice-president research, commodity and currency, at JM Financial, said. The market has already priced in the uncertainties relating to the wars in Ukraine and West Asia, and the yellow metal's rally is likely to be paused as it will not sustain above $2,950 an ounce in the international market and INR 86,300-INR 86,700 per 10 grams in the domestic market, Mer told Informist in an interaction.

 

Central bankers began adding gold to their reserves after Western countries confiscated Russian assets held abroad in the wake of the country's attack on Ukraine in February 2022. "That is the reason why central bankers are repatriating their gold back (to their home countries), because as long as gold is in your hands, you are safe. If it is with someone, it is not your gold," Mer said. Gold prices have risen more than 50% since the start of Russia-Ukraine war.

 

Asked about a possible correction in gold prices, Mer said the metal has strong support at INR 84,000 per 10 grams and until that level is breached on the MCX, he does not expect a bigger correction. The period of consolidation could extend for a few more weeks, he said. However, if the floor of INR 84,000 is broken, then gold could dip towards INR 81,000 per 10 grams, he added.

 

Mer remains optimistic about silver and expects the white metal to outperform gold as it tries to play catch-up with the yellow metal. He sees silver prices touching INR 110,000-INR 112,000 per kg this year. "For silver to rally, base metals need to support, which has started on a positive note because of better-than-expected economic data from China," he said. "If Trump starts imposing tariffs, it could push up base metal prices and silver will follow." Around 60% of global silver demand comes from the industrial sector.

 

Mer remains positive on copper and sees prices of the red metal reaching INR 940-INR 950 per kg on MCX and $10,800-$11,000 per tonne on the London Metal Exchange on tariff concerns and the recovery in the Chinese economy. China's industrial production witnessed accelerated growth last year, driven by the country's continued efforts to optimize and upgrade its industrial structure, according to the National Bureau of Statistics. China's value-added industrial output, an important economic indicator, rose by 5.8% on year in 2024, accelerating from the 4.6% growth recorded in 2023, the data showed.

 

India has seen a bit of a slowdown, "but I feel that should be temporary", Mer said. The momentum will start picking up again and interest rates will not go higher, he predicted.

 

On crude oil, Mer said the commodity will trade in a range and he does not expect a major fall or rise in prices. The downside is limited by the price curbs on Russian crude. Russia cannot sell its crude oil above $60 a barrel, making the level a floor for global crude oil prices. The upside is restricted as the Organization of the Petroleum Exporting Countries and allies will start increasing output from April, he said.

 

OPEC and its allies are now coming to terms with the fact that their rivals benefited from their production cuts and now even the US is offering crude oil to India and China, providing even more competition in the market. Over the past three years, Russia has garnered majority market share in India and China and even if the global tensions ease over the next 3-4 months, it would be difficult for OPEC and its allies to regain their market share.  End

 

US$1 = INR 87.21

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

 

Edited by Rajeev Pai

 

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