Gold, silver edge closer to Rs 50,000 as fears of Covid resurgence rise

Topics Gold  | Silver | Gold Price

Temporarily there may be some fluctuations, but the overall trend in gold is going to be bullish
Precious metals inched towards fresh all-time highs. At Mumbai’s spot Zaveri bazar, gold price closed at Rs 48,690 per 10 grammes and silver closed Rs 1,055 higher at Rs 49,655 per kg, its highest since September 2019. With the addition of 3 per cent goods and services tax, the precious metals were trading above Rs 50,000.

Gold traded at over $1,800 in Comex gold futures and looked to surpass $1,900 in the international market. On the MCX, gold futures for August expiry were trading at Rs 48,915 per 10 grammes.  Silver witnessed a high of Rs 50,891 per kg in the September expiry contract on the MCX.

A few factors have pushed gold demand, like fears of a resurgence in new Covid-19 cases and  uncertainty over the status of Hong Kong. 

Interest rates are already low and the economic situation is worsening in the US and around the world.
Silver was also quoted over Rs 50,000 without GST. Interestingly, physical demand was lower in the market as the lean season has set in and there is no liquidity to buy gold.

Aditya Pethe, director of WHP Jewellers, said, “The current trend for gold is bullish and it is likely to move upwards in the next 2 years. In the coming six months to one year, gold prices are likely to cross $2,000, which is roughly Rs 55,000.”

 

 
In 2011, gold reached above $1,900, but fell sharply afterwards and consolidated at around $1,000. 

Now, the market is witnessing another bull run that may turn out to be secular, at least for gold.

According to Metal Focus, a London-based bullion and metal research firm, “gold continues to have plenty of upside from current levels. We expect prices to come close to the 2011 peak of $1,921, although that level may not be breached this year.”

This may not to be a straight line rally and there will be periods of liquidations that will potentially take it to levels as low as $1,600. Investors should buy at such. 
That will make such dips short lived. Overall, we forecast gold price will average $1,700 in 2020, up 22 per cent year-on-year.” So far in 2020, gold price has averaged at $1,647 per ounce.

Flip side

There is a flip side to this though. In India and in many markets, money may flow to stocks in the hunt for bargains. A decline in overall consumer savings is also likely to undermine gold investment. 

Institutional investors might continue to buy sovereign gold bonds.India and china, the two largest consumers, have seen sharp reduction in gold demand with India’s jewellery demand, as projected by Metal Focus, expected to fall 36 per cent to 348 tonnes. Simultaneously, in many emerging market the sale of old jewellery will be higher, and will also hit fresh demand.


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