Gold to gain from crypto fall, dollar weakness

The fall in the value of cryptocurrencies and a subdued dollar index will be supportive of gold. Once the speculative money starts moving from cryptocurrencies to gold, the yellow metal prices are likely to touch fresh highs.

“Cryptocurrency is neither a currency nor an asset class. But we have seen enormous amounts of speculative money going into them in the past one year as Bitcoin value moved up from $8,000 to $60,000 levels. Single day drop of 40 per cent has made investors realise that cryptocurrency movement has been just speculation,” said Ajay Kedia, MD, Kedia Commodities.

According to him, the movement of speculative money into cryptocurrencies had led to sluggishness in gold in the past few months despite strong fundamentals. However, now the trend shall see a reversal and this has been evident from the gold price movement in the past few sessions.

“Gold prices in the international markets have gained by around 11 per cent while on the MCX futures it has gained by around 10 per cent between March 8 and May 19,” said Prathamesh Mallya, AVP-research, non-agri commodities and currencies, Angel Broking.

Analysts at JPMorgan Chase too have found that large institutional investors are dumping bitcoin in favour of gold. The bank in January had predicted that bitcoin could conceivably become an alternative to gold, hitting $146,000 in the long term.

The fall in the value of the dollar in recent weeks also increased optimism in gold prices. The dollar index on May

19 came down to 89, lowest level in a year.

Mallya expects gold prices to move higher towards Rs 51,000 per 10 gm mark in a month. According to Kedia, it will take at least a month’s time for the speculative money to move into gold. Once this happens, international prices can move towards

$2,100 per ounce in a couple of months.