Gold prices rally 28% so far this year; yellow metal likely to touch Rs 65,000 per 10 gm in 2021

Gold prices in India rallied 28 per cent in rupee terms so far in the year 2020, following a double-digit gain in the previous year. During March this year, yellow metal hit a 52-week low of Rs 38,400 per 10 grams from the level of Rs 39,100 per 10 gm at the start of the year. However, surging a massive 46.33 per cent, it scaled an all-time high of Rs 56,191 per 10 gm in August. While in the international market, it reached a record high level of USD 2,075 an ounce. On a year-to-date (YTD) basis in the current fiscal, gold prices have surged 17.04 per cent.

According to an analyst, improved prospects of global economic recovery due to successful vaccine development have been a key factor for money rotation from gold to risky assets like equity in the last couple of months. “Four-month correction in gold is over and statically gold should have a strong first quarter in 2021. Gold appears to have bottomed out last month and we might see some hiccup in 2021 when the vaccine is rolled out globally but it would be a good opportunity to go long during that time,” Bhavik Patel, Senior Technical Research Analyst, Tradebulls Securities, told Financial Express Online.

Gold generates steady returns over various time periods

Gold prices are nearly 10 per cent off from its record high level following the news developments around COVID-19 vaccine. Gold has a track record of generating steady returns over various time periods. According to the analysts at Religare Broking, gold has delivered 13.37 per cent annualised CAGR return over the last 15 years, 9.22 per cent for the last 10 years, 14.96 per cent for the last 5 years and 19.75 per cent for the last 3 years. Gold prices act as a hedge against inflation amid the low-interest rate environment and a huge amount of liquidity infusion in the economy.

Gold may test Rs 65,000 per 10 gm in 2021

Bhavik Patel expects gold to test $2150-$2200 in 2021 and sees silver hitting $35-$40. While on MCX, gold is expected to test Rs 62,000-65,000 in 2021. The fiscal measures to stem the economic fallout due to COVID-19 have already surpassed the last crisis in 2008 with no sign of slowing down. “Money supply has rocketed by more than 20 per cent in just four weeks which is pushing the US dollar down and increasing inflation,” Patel said.

“As we approach 2021, gold will remain in focus for investors, as central banks across the globe have pledged to keep rates low, and easy liquidity to aid growth,” said Nish Bhatt, Founder & CEO, Millwood Kane International. The efficacy of the vaccine, proper implementation of the vaccination process in developing countries, low-interest rate regime, and the global central bank’s stance on liquidity will guide gold prices in 2021.

According to the analysts at Religare Broking, even as volatility in gold prices may remain high after the sharp run-up, metal has a firm support zone at Rs 47700-47200 per 10 gram levels ($1750 per ounce), while the major floor is seen at $1680 per ounce or Rs 44800 per 10gms. “As long as the counter is placed above the mentioned support area, long term structure looks positive where one can expect an upside move towards Rs 53500 per 10 gram initially and then towards Rs 60500 per 10 gram in the medium-term,” the brokerage firm noted. While for the year 2021, it believes gold prices can even scale higher towards Rs 65000 per 10 gram.

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FAANG stocks fail to shine last week despite NASDAQ’s jump; 3 of the 5 big tech shares tumble

The holiday-shortened previous week saw the NASDAQ index gain 1% overall, after having suffered a steep fall during the initial hours of trade on Monday morning. The star constituents of the index — the FAANG stocks — witnessed a mixed bag of a week, with some gaining and others losing. So far this year, FAANG stocks have gained 50% on average, outperforming the benchmark NASDAQ index. Apple has been the best stock so far this year among the big-tech names that make up the FAANG stock list.

Facebook in the previous week registered a 3.3% fall as it failed to recover after Monday’s fall and only added to the losses. At the end of the trading session Thursday, the stock was quoting a price of $267.4 per share. During the week, reports claimed that Facebook has shut one of its intellectual property units in Ireland. The unit was claimed to be a tax-saving mechanism used by the social media behemoth. Another news around Facebook that hogged the limelight this past week was the news of Mark Zuckerberg selling 44,750 shares of the company for a total amount of $12.2 million.

The manufacturer of the iPhone, Apple, had a way better week than Facebook as stock price gained 4.2%. This stock movement came in a week when reports claimed that the company was planning to make electric vehicles by 2024. The news of Apple preparing to launch a car by 2024 was reported by Reuters, they said it is most likely the passenger car of the company will be powered by its own battery technology. Stocks of the technology giant closed at $131.97 per share last week.

Amazon was also one of the laggards in the previous week. Jeff Bezos’ firm saw it stock price slip 0.90% in the week to close at $3,172.69 per share. Streaming service Netflix was also in the red last week, slipping 3.7%. The Co-CEO of the frim, Reed Hastings has sold 437,311 shares of the firm this month for $527 per share, according to reports. The total stake sale value was $230.6 million. This comes less than a month after Reed Hastings had sold over 213,000 shares of the firm.

Technology giant Google recovered sharply from the initial fall in the week gone by and ended flat with a positive bias. Shares of the firm closed at $1,734.16 per share. Since December 2, shares of Google are down 5%.

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Mrs. Bectors shares grey market premium surges 75% amid volatile stock market; check listing day strategy

Mrs Bectors Food Specialities shares are scheduled to make a stock market debut on Monday, December 28, 2020. The Rs 540-crore IPO was subscribed a whopping 197.38 times, becoming the most subscribed issue of 2020 so far. The company is the largest supplier of buns in India to QSR chains such as Burger King, McDonald’s, KFC, Carl’s Jr, Pizza Hut and Dominos Pizza. It sells its premium bakery products under ‘English Oven’. Mrs Bectors Food came up with its public issue following the successful listing of Burger King India which was listed with a 92 per cent premium to its issue price of Rs 60. In the grey market today, Mrs Bectors Food Specialities shares were seen trading at Rs 503 apiece, implying a premium of Rs 215 or 75 per cent over the IPO price of Rs 288 apiece.

Bectors listing day shares

Mrs Bectors’ numbers over the last few years have not been that good. Amarjeet Maurya, AVP – Mid Caps, Angel Broking Ltd told Financial Express Online, that the first half performance was good as compared to the first half of the previous fiscal because the consumption of bread, biscuits and other bakery products increased. Consumption was also high for Britannia Industries. Overall the business model is good with a healthy market share in North India and in exports as well. “As an investor, if I get more than 50-60 per cent return, I would book profits and wait for a correction in the stock and then invest again. We are expecting that Mrs Bectors Food Specialities might get good multiples although not as high as other listed peers like Britannia Industries and Nestle India,” Maurya said.

Manan Doshi, Co-Founder, UnlistedArena.com dealing in Pre-IPO & Unlisted Shares, told Financial Express Online, after the recovery in broader market and post declaration of allotment status, Mrs Bectors Food Specialities IPO is expected to list with a hefty premium of 75-85 per cent which implies the listing of shares above Rs 500 mark.

While Vishal Wagh, Head of Research, Bonanza Portfolio Ltd, told Financial Express Online that investors should opt listing gains amid share market volatility. “We expect near to 10-15 per cent listing gains due to high market volatility. Any follow up selling in market may lead to early profit booking,” Vishal Wagh said.

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Time to own Bitcoin? Chris Wood to trim Gold weightage and make way for Bitcoin investment

Bitcoin is again making headlines with the unreal upwards movement it recorded on the price charts recently, setting fresh all-time highs. The crypto currency has gained nearly 400% since March this year and over 200% since the beginning of this pandemic struck year. Investor’s interest in bitcoin has been gaining steam in 2020 and it’s not just small investors, institutions too have joined in cheering it. Seeing these developments, Chris Wood, global head (equity strategy) at Jefferies, has decided to introduce Bitcoin in its long-only global portfolio.

In his weekly newsletter, Greed & Fear, Chris Wood said that Bitcoin will be introduced in the long only global portfolio for US dollar-denominated pension funds. Chris Wood had made a case for owning Bitcoin back in June of 2019. The investment space for Bitcoin will be made by reducing the weight of physical gold bullion by 5 percentage points. “If there is a big drawdown in bitcoin from the current level, after yesterday’s historic breakout above the US$20,000 level, the intention will be to add to this position,” Chris Wood said last week.

Bitcoin institutionalisation

His views on owning the crypto currency have been strengthened by the ‘institutionalisation of Bitcoin’ and with custodian arrangements being made available. Retail investors can now buy into Bitcoin via quoted vehicles, unlike before when the risk of Bitcoin accounts being hacked was real. Wood also highlighted the case of Nasdaq-listed MicroStrategy, a business intelligence software company, that has invested in the Bitcoin equivalent of$425 million ($250m in August and$175m in September), amounting to almost 100% of its own treasury funds, to hold on its balance sheet.

MicroStrategy, in its filings to the SEC said that the aim is to make Bitcoin “the primary treasury reserve asset on an ongoing basis”, along with cash and short-term investments. “This marks a watershed moment in GREED & fear’s view since the auditors approved MicroStrategy putting Bitcoin on its balance sheet as did the SEC,” Chris Wood noted. He further highlighted that MicroStrategy’s market capitalization has risen 131% since announcing its investment in Bitcoin and the value of its Bitcoin holding has almost doubled to $917 million.

Gold not out

Although Chris Wood is trimming Gold’s weight, he said that this does not mean that he is going to give up on gold. “… the yellow metal should rally again if the Fed stays dovish in the face of the dramatic cyclical recovery that is coming on the other side of the pandemic, in line with GREED & fear’s base case,” he said.

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