Gold Price Surge Again; Upside Of Another 25% Seen In Yellow Metal

Gold prices in India on Tuesday (August 4, 2020) rose 0.42% or Rs. 226 at Rs. 54223 per 10 gm in the MCX, while silver prices edged higher by 0.17% or Rs. 112 to Rs. 65860 per kg.

In Monday's session gold in the bullion market was also close to Rs. 54000 price on rupee depreciation.

Global gold rates soften on rebound in dollar and robuts manufacturing data of US

Global gold rates today softened as dollar rebounded by a tad bit and a robust manufacturing data in the US, at 1.5 year high, boosted risk-on sentiment. Spot gold was down 0.2% at $1,973.54 per ounce by 0026 GMT. It hit an all-time high of $1,984.66 in the previous session. U.S. gold futures rose 0.2% to $1,989.20.

Nonetheless the losses remained capped due to concerns over corona. On Monday WHO said that there shall never be a full 'silver bullet' for Covid 19 as a normal fool-proof vaccine and the road to normalcy would take longer.

As per a Reuters tally, global caseload of coronavirus is at 18.19 million, while death toll stands at 6.89 lakh

Upside seen of 25% in Another 1.5 year in Gold Price

A host of factors are influencing the forward march in gold price and estimates suggest that by the next year we can see gold prices touch Rs. 67000 per 10 gm

1. Interest rates near zero in most economies to combat the economic fall out due to coronavirus

2. Monetary and fiscal stimulus fuelling liquidity that is seeing a part of it move into gold asset class which has gained enormously in the last few months

3. At the start of economic recovery, there is seen upward move in precious metals including gold.

4. There is geopolitical stress now emerging between US-Iran as well as other nations which increase gold's appeal as a safe haven. As it is US-China continue unabatedly.

5. Rising corona cases is also a propelling factor. At the time of writing this report India has even surpassed the US in reporting the highest one-day caseload of 52,972 cases on Monday i.e. August 3, 2020.

6. Gold ETFs have been gaining traction since the start of 2019 and SPDR holding which is the largest Gold ETF has the highest all time holding

7. Economic growth concern loom and IMF revised growth forecast for this year to -4.9% from -3%.

8. Central bankers are piling on gold reserves amid the uncertainty and as on May 2020 their gold holding is at 181 tonnes of gold.

In dollar times, gold is expected to scale to an all time high of $2500 per ounce going into 2021. While in the rupee terms, gold is expected to be at Rs. 67000 per 10 gm by 2021 end as per Damani, VP - Commodities Research, Motilal Oswal Financial Services.

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