Samvat 2078: Corrections & dips are good opportunities to buy gold: Motilal Oswal’s Kishore Narne

The start of Samvat 2078 could well turn out be the cherry on the cake for the commodities sector, which is bracing for its best annual performance in a decade. While higher investment on public infrastructure made metals shine, continued improvement in the global demand for commodities became a catalyst.

To discuss the key themes that emerged in the commodities sector in the year gone by and the road ahead, CNBC-TV18’s Manisha Gupta spoke to Naveen Mathur, Director - Commodities and Currencies of Anand Rathi, Kunal Shah, Head of Commodities & Currency Research at Nirmal Bang Commodities, Kishore Narne, Head of Commodity & Currency at Motilal Oswal Commodity, and Pritam Patnaik, Commodities Head at Axis Securities.

On gold, Narne said, “Things are very simple right now, one is inflation, the other is whether the Fed is going to cut down the money supply or not and the third and the last one is the alternative asset class, that is the equities and the risky assets ― these three are key components of decision-making as far as gold investment is concerned.”

“In my view, especially when we look at the long-term picture rather than the short-term day-to-day activities, I think gold becomes a crucial part of the portfolio rather than a tactical asset as the tactical asset component actually keeps changing.”

He added, “But should I buy now? If you are doing a tactical investment, once the Fed comes out probably you get a kneejerk correction; corrections and dips are good to buy. If you are looking at 12 months, I think Rs 52,000 is a target which you can look at for the next 12 to 18 months. It is a decent return, but the pace will definitely disappoint you.”

On the super cycle in commodities, Shah said, “I don’t think it is a super cycle in commodities. I think we have seen the best; whatever we have seen in metals is the best and I don't expect that to continue going forward in the next year. There are three reasons mainly for that. One, inflation. Inflation is the biggest worry and all the liquidity what we have seen from the central banks is not permanent. It is a short-term measure which central banks have taken in order to combat the ongoing pandemic. So, when your money loses value, the value of commodities shoots up and all commodities generally rally. So, maybe agricultural commodities, metals, oil, gold, or any other commodities, but now, things are different.”

“Now, Chinese growth is faltering, a slowdown is taking place in China. So, what have you seen in the last 10-15 days? Steel prices are down by 30 percent. Already we are starting to see this in metals, this entire slowdown of China being played out. So, the bullish trend, what we saw was mainly on account of the supply concerns. So, (I'm) not bullish for next year, sell metals on rallies. I am not expecting any major fireworks coming out of this.”

On crude oil, Patnaik said, “Clearly, there is a supply constraint where demand is outstripping supply now. This is primarily due to the global economic opening up post COVID; there is a huge demand. But the energy crisis, which we have seen due to (the shortage of) natural gas, and coal has kind of aided crude oil prices to rally further. But is this rally going to continue unabated? I really don't think so. We are going to see a little bit of volatility throughout the year in my opinion. If the winters were to turn out to be more severe that will impact natural gas prices, and you could see a little push in crude oil prices; you could see it crossing the $100 mark.”

“However, will it sustain there. I really doubt it because come summer or if you have a milder winter, you would see a sharp correction in natural gas prices, which would then impact the whole demand or the pressure on crude oil prices. That said, am I negative on crude oil? No, actually I will be conservatively optimistic on crude oil. My sense is that in Indian terms, we will see levels of Rs 6,100, I think that is a good time to enter because towards the end of the year, we could even see Rs 6,800-6,900 levels in crude oil. So, like I said, conservatively optimistic on crude oil.”