Gold prices in the bullion as well as futures markets scaled to a new record high of Rs. 50181 and Rs. 50199 per 10gm, respectively on July 22, 2020. And experts opine the precious yellow metal to touch Rs. 65000 per 10 gm in a matter of just 18 months.
Kishore Narne, Associate Director and Head, Commodities & Currencies, Motilal Oswal Financial Services, said the brokerage has revised its in 18-24 months targets to Rs 65,000/10 gm from Rs 42,000. "We continue to maintain this target as the fundamental backdrop which has driven gold over the span of last four months -- lower interest rates, negative rates in few economies, enormous amount of liquidity and expanded fiscal balance sheets of governments which are trying to push growth amid the COVID-19 pandemic -- continues."
Now in the latest uphill move, the following factors supported gold:
1. Worsening US-China tension:
The US has asked China to shut down its Houston based consulate in 3 days time as the country needs to safeguard its IP and the information resulted in a bout of risk aversion.
2. Broadening balance sheet of different economies amid the pandemic:
To offset the coronavirus economic fall out, economies around the world have been pumping in money and after the recent stimulus worth 750 billion euro announcement by the European Union, the US is also discussing a next round of relief as extended unemployment insurance.
Also, Japan given the slump in its industrial activity for 15 straight months in July may again push the economy to dole out another stimulus package.
3. Softness in Dollar:
The dollar index also held at a more than four month low and in low interest rate regime it is the non-interest yielding assets that gain traction. "Overall, we expect demand for safe-haven assets like gold and silver to remain relatively strong for the remainder of 2020."
4. Global equity markets mixed sentiment:
Gains in the yellow metal to record high also were propelled by mixed and in fact marginal declining sentiment in the world equity markets. And equity and gold to an extent share inverse relationship i.e. when equities falter, gold gains.
5. Rising Corona cases globally:
In India, the active corona case load nears 1.2 million while on a worldwide basis there 15,097,649 confirmed cases and 619,558 deaths from the coronavirus COVID-19 outbreak. The spike points to the fact that economic recovery is far from assured in the near term and is leading to investors fleeing to safe haven assets including gold and silver.
What Should Investors Do?
Buyers wanting to tap on the probable capital appreciation in the metal should use every dip in price in gold to invest in the yellow metal targeting a price of Rs. 65000 per 10 gm in the short to medium term.