On Tuesday, gold prices in India rose as investors preferred the US dollar as a safe-haven asset amid warnings of a second wave of coronavirus infections in Wuhan (the epicentre of the outbreak) and South Korea.
Gold futures (June 2020) on MCX were trading higher by 0.3 percent at Rs 45,922 per 10 grams on Tuesday after ending lower at Rs 45,781/10 grams on the previous day.
This increase comes despite subdued international prices of the precious metal as the US dollar rose to a more than
two-week high, making the metal costlier for investors holding other currencies. The American currency is considered a safe store of value in times of economic and political uncertainty, adding pressure on gold. Meanwhile, the Indian rupee was trading at 75.73 against the dollar, its one-week low.
Spot gold was unchanged at $1,695.75 per ounce and U.S. gold futures eased 0.2 percent to $1,695.40 on Tuesday morning.
A Reuters report on Sunday said that South Korea warned of a second wave of cases as a new cluster formed around a number of night clubs just a week after it eased restrictions on running businesses. On Saturday, the country shut down all night clubs, bars and discos in its capital Seoul after dozens of infections were linked to club goers.
Similarly, Wuhan reported its first cluster of infections since a lockdown there was lifted a month ago. All of the latest cases were previously classified as asymptomatic, that is people who test positive for COVID-19 and are capable of infecting others but do not show clinical signs such as a fever.
"At present, the task of epidemic prevention and control in the city is still very heavy," the Wuhan health authority said in a statement. "We must resolutely contain the risk of a rebound."
However, experts have a positive outlook on gold for the long term as it tends to benefit from stimulus measures announced by major central banks because it is widely viewed as a hedge against inflation and currency debasement.