The steady decline in gold prices is causing anxiety to investors in the yellow metal. Gold prices have declined to a multi-month low and are trading below Rs 45,000 per 10 grams in the domestic markets. The rates have fallen over by Rs 11,500 from the record high level seen in August 2020.

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A jump in US bond yields, strengthening of the dollar, rising equity prices and a positive outlook on economic recovery have reduced the allure of gold as a safe-haven investment, causing its price to fall.

However, analysts feel this correction can be used to buy gold from a long term perspective. They argue that government stimulus and loose monetary policies of global central banks globally will at some point stoke inflation and erode the value of currencies.

“Gold prices have stabilised at multi-month low levels. The precious metal is in oversold territory and we may see a rebound in prices due to short covering. Investment rotation within the commodities will support gold, going ahead,” said Amit Sajeja, Vice President – Research, Commodities & Currencies, ‎Motilal Oswal.

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Chintan Haria, Head- Product Development & Strategy, ICICI Prudential AMC advises investors to consider around 10 percent allocation to gold in their portfolio, as a hedge against inflation,. Investors looking to increase exposure to gold can consider buying into the current correction, he said.

“Post the recent correction, we are positive on gold on relative valuation with equities and uncertainties seen in the debt market. We believe, due to the ultra-loose monetary policy of global central banks, an uptick in inflation is likely due to the firming up of commodity prices,” said Chintan Haria, Head- Product Development & Strategy, ICICI Prudential AMC.

Vijay Bhambwani, head of behavioural tech analysis at Equitymaster expects gold to make new highs by end of 2022.

Speaking to CNBC-TV18, Bhambwani said, “We have a long term bullish call on gold. If you have time till end of 2022, I think a new high might just be possible in gold.”

Hitesh Jain, Lead Analyst - Institutional Equities, Yes Securities, remains bullish on gold prices considering the unprecedented government stimulus, bloated central bank balance sheets and burgeoning sovereign debt.

“This is tantamount to the debasement of currencies like the greenback. A structural decline in USD against the basket of currencies will also underpin the value of an alternative currency like gold,” said Jain.

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