Gold zooms by Rs 2,000 in a week on coronavirus, silver up marginally

Prices in India are trading at a huge discount to the cost of imports.
The yellow metal witnessed a rally at Mumbai’s physical market on Friday with standard gold (995) closing over 2.4 per cent at Rs 44,237 per 10 gram, which is Rs 1,236 higher than Thursday’s rate. The yellow metal has seen a Rs 2, 000 jump this week and over Rs 3,000 surge in the last two weeks. 

After the 3 per cent goods and services tax (GST), price of the yellow metal crossed the Rs 45,000-mark on Friday. Silver went up over 2 per cent to close at Rs 47,125 per kg.

Gold has also been unshaken internationally by the coronavirus outbreak, with prices heading towards a multi-year highs. Experts are looking at a price of $1,700 in the near term, although last week the yellow metal fell sharply before moving to the $1,680 level.

Gold in India is trading at a huge discount compared to import rates. In early hours, gold was trading at around 1 per cent discount. During the day, the discount was at 1.5 per cent or $16-22 per ounce. Jewellers said only forced demand for the precious metal has been seen. Otherwise, demand has almost evaporated. Their expectation is that once all central banks announce their stimulus packages, the market may see some profit booking.So, prices could fall a bit after customers enter the market again.

The international market has seen another jump of over $1,690 per ounce on Friday, a $100 rise in three days, after Fed’s rate hike. 

The price started moving up after California declared a state of emergency amid the outbreak that killed 11 Americans so far and infected 100 others.

Metal Focus, a London-based consultancy, said in its latest report on gold that apart from the virus spread and Federal Reserve sharply cutting interest rates, “impact of political turmoil and geopolitical tensions also proved positive for the metal. Among various problems, some that stand out include uncertainties ahead of the US presidential election, uncertainties surrounding the Brexit negotiations and ongoing tension across the Middle East.” 

World Gold Council data released on Thursday night also shows that global gold exchange-traded funds (gold ETFs) and similar products added 84.5 tonnes, or net inflows of $4.9 billion, across all regions in February. This boosted holdings to new all-time highs of 3,033 tonnes. 

With the higher gold price, ETFs gave 4.4 per cent returns in a month, breaching the previous record high in September 2012.
The council also stated that in 2012, gold price was 10 per cent higher than the current levels and US investors have not yet increased their gold allocations as much as they did that year.

Metal Focus said that, political and economic conditions suggest that, “institutional investors’ appetite for gold will go up further. Investor positions are high in both tonnage and value terms at present. They are far lower than during previous peaks. This will leave considerable room for further rotation by mainstream investors in gold from stock and bond markets.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel