Gold facing a turbulent January. Is this the right time to buy it?

This small rise in the price of the metals on MCX came after the steep decline on Friday when gold prices fell by ₹2,000.

Gold was the top performer of 2020, with the year highs termed as the highest in a decade, recording gains as high as 25 per cent. However, the new year began with some turbulence in the prices of the precious metal as the optimism in the economic recovery gained momentum amongst investors.

Meanwhile, the government is also releasing its tenth tranche of Sovereign Gold Bond scheme on Monday. (Reuters file photo)

On the Multi Commodity Exchange (MCX), February gold futures rose by 0.59 per cent or ₹291 to ₹49,258 per 10 gram and March silver futures gained 1.56 per cent or ₹1,000 to ₹65,231 per kg on Monday.

This small rise in the price of the metals on MCX came after the steep decline on Friday when gold prices fell by ₹2,000 and silver recorded a dip of more than ₹6,000. This was in contrast to the previous year when gold had recorded a high of ₹56,200 per 10 gram in August.

As per analysts, the precious metals are facing a switchback week in January on the back of dollar recovery and unexpected high yields from the US Treasury bonds. Howie Lee, an economist at Oversea-Chinese Banking Corp has said that the increase in yields from the bonds is "pouring cold water on gold at the moment".

"Rising inflation expectations and higher yields are pulling gold in different directions right now and the latter seems to be prevailing. Gold may trend sideways for now but rising inflation expectations would likely drive gold higher later in the year,” Bloomberg quoted Lee as saying.

The cryptocurrencies have also fallen with the rise in US bonds yield. Bitcoin on Monday recorded a one-week low as the yields pushed the dollar to recovery. The change in the US administration with US president-elect Joe Biden's inauguration scheduled for January 20 and stimulus hopes are riding the stocks high, denting the gold market.

However, HDFC Securities anticipates this dent on gold as short-lived. "Gold prices traded under pressure with recovery in US long term bond yields. The 10 year US treasury yields hit the March 2020 highs which also triggered short unwinding in the dollar. The traders and investors rushed to book profits in gold on risk on sentiments with buying in riskier assets," Mint quoted the brokerage as saying.

Meanwhile, the government is also releasing its tenth tranche of Sovereign Gold Bond scheme on Monday. Investors can apply for subscription till January 15, 2020. The issue price is fixed at ₹5,104 per gram of gold.