Sunil Kashyap, MD of ScotiaMocatta, says that there is enough liquidity to support gold prices. He also adds that gold fundamentals would remain bullish though it may see some correction.
Kashyap states that gold has a strong support at $540-550/oz, which could further rise to $625/oz. According to him, silver may touch $9/oz before climbing to $11/oz.
Excerpts from CNBC-TV18's exclusive interview with Sunil Kashyap:
Is the worst over for gold now or is it just a technical pull back bounce from oversold ground?
The situation right now is that we have a market, which is going absolutely bizarre. We had some kind of correction, which is coming back to reality. The basic story still remains bullish. We needed to have a correction just to bring sanity back to the market.
Do you see gold going back to test $500 levels?
I don't think so. I think there is enough liquidity right now and enough of story behind gold where people will continue to buy gold at dips. So we may see that price may come off a bit. But we will find liquidity rushing towards the market and supporting the downside.
Was this a technical correction that has now stabilized a bit or are you genuinely seeing funds coming back and going long on gold again?
I think it was a technical correction. I think the market movements have been uni-directional, right from gold being at 400 to 720. So it needed some healthy correction. But we still see funds coming in so I think there is some support on the downside for this metal.
Is it only in gold that you are seeing buying coming back or is it a broad call across metals, whether it is precious
I think we have seen some support both in precious and base metals. Specifically in precious metals besides gold, silver has also seen some support. We have seen it rebound from $9.50 back to above $10 right now. Similarly, platinum has also seen a good bounce in the last couple of days.
What is your sense on the liquidity situation? There must have been some hedge fund activity, which was happening. Has most of the unwinding happened from those quarters?
The recent pull back, which we have seen in the last couple of days shows that people who had to take pain have taken it. They have cut their losses and we are seeing fresh money coming back in. I think the allocation into these funds remains strong and therefore they are just looking for a chance now to come in and buy.
What we saw, was a situation where the market was over-heated, there was too much of short-term money coming into the market, which is why we suddenly saw this spike. This correction has really pulled out the short-term speculative money but for the core long term buyers, the funds that need to be allocated for 1-3 years continue to buy the metal.
What kind of goal post do you see for prices in gold and silver for the next couple of months?
For gold, we are looking at a range of $540-$550, which seems to be a very strong support level and we should see it slowly trading it above $600-625.
As far as silver is concerned, silver has a mixed story. One should see a little bit of a downside at around $9 and the upside at around $11.
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