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Should you buy gold now? How analysts are viewing the Ukraine-Russia conflict

Should you buy gold now? How analysts are viewing the Ukraine-Russia conflict

By Sandeep Singh  Feb 21, 2022 3:57 PM IST (Updated)

Russia-Ukraine conflict impact on gold rates: Will gold prices move higher on account of rising geopolitical concerns as investors track updates on the Russia-Ukraine situation?

Gold cooled off from an eight-month peak as concerns about Russia's conflict with the West over Ukraine ebbed. Despite the recent surge, the yellow metal is still a long distance away from its all-time high, reached in August 2020. But, is this a good time to go big on gold?

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'If the Ukraine-Russia issue escalates further, gold might be supported amid safe-haven buying. But if there is any resolution through diplomatic talks,  a corrective move is possible," Ravindra Rao, CMT, EPAT, VP-Head Commodity Research at Kotak Securities, told CNBCTV18.com.
This corrective move, he believes, will be of the same magnitude as the premium built due to the geopolitical tensions brought about by the issue.
At 3 pm, MCX gold futures were at Rs 49,925 per 10 grams, down by Rs 187 or 0.4 percent from their previous close. Earlier in the day, the contract swang between Rs 49,764 and Rs 50,127 amid volatile trade.
Globally, spot gold edged lower to $1,897 per ounce at the last count. Earlier on Monday, it touched $1,908 -- its highest intraday peak recorded since June 3.
For now, US President Joe Biden's in-principle agreement to a summit with Russian President Vladimir Putin over the Ukraine crisis has dented gold's appeal as a safety bet.  Foreign ministers of both countries will meet next week.
"If these talks get more heated and the possibility of war takes shape, it could influence investors to rush out of riskier assets and cling on to safe haven asset such as the dollar or sit on cash... But if the talks go well and geopolitical tensions ease, it could boost risker assets appeal and influence a selloff in the safe haven assets, bringing gold to important support at Rs 47,500-47,000; which one could use as a buying opportunity," Navneet Damani, Senior Vice President-Commodity and Currency Research at Motilal Oswal Financial Services, told CNBCTV18.com.
Damani maintains a positive bias on a quarterly basis, and sees targets of Rs 50,750 and Rs 52,500 for the yellow metal, with support at Rs 47,850 and then Rs 46,400. He recommends adopting a buy-on-dips strategy.
"An extended rally can be seen at around Rs 55,000 over the next 12 months," he said.
What should investors do?
Manoj Kumar Jain, Director-Head Commodity and Currency Research at Prithvi Finmart, expects the yellow metal to test $1,960-1,980 per troy ounce and Rs 50,800-51,500 per 10 grams levels in case the tensions escalate.
"If the US and Russia reach a diplomatic solution on Ukraine, profit booking is expected in gold, which could test its support level of $1,850 per troy ounce again. On MCX, it could test support at Rs 49,000-48,800 again," Jain told CNBCTV18.com
His advice: Book profit in long positions and wait for corrective dips for fresh buying.
Levels to watch out for
Kotak Securities' Rao sees initial resistance for the April futures contract of the precious metal on MCX near Rs 50,400. "If that is taken out on a closing basis, the bulls might target Rs 51,000, followed by Rs 51,800," he said.
He sees $1,960 per ounce as the extreme-case target for the international spot benchmark. "We expect gold to find resistance near $1,916, which, if taken out, might push it further towards $1,960," he said. 
Which route to take?
Damani believes investors can trade on the exchange, or invest in Sovereign Gold Bonds (SGBs) or other platforms such as ETFs and digital gold based on their risk appetite.
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