Gold Prices Fall 10% In A Month; Move Away From Gold’s Eight Straight Month Rally Globally

Gold rates in India having jumped to a record high this month of Rs. 56200 per 10 gm on August 7 have lost their grip aided by a mixed set of cues. If we talk of the yesterday's session gold tracking stable rates overseas jumped by a tad on indications that the US will further release the bail-out package which will help the world's most developed economy to return to its pre-Covid strength. But the yellow-metal then buoyed by stronger dollar as a result of better employment figure released later in the day in the US was dragged lower again by a tad.

India gold rates moved away from global gold-run in August

This is owing to rupee's strength against the dollar. Gold prices in India depend on dollar-rupee movement as well and as much of the gold is imported any depreciation in rupee causes gold to become dearer and in the current scenario rupee has shown strength owing to RBI's intervention to maintain stability in the financial sector, we have seen rupee go above 73 levels during the last week. On Friday, rupee ended at 73.14 per US dollar.

Global gold rates recorded a record run-up with prices hitting beyond the crucial $2000 level mark and then chased $2100 per ounce in the first week of August.

What May Support Gold In The Near-Term?

1. Interestingly, gold prices in rupee terms are influenced by overseas rates and any negative impact on the dollar or weakness in the dollar owing to economic uncertainty may give a push to the yellow metal.

2. US coming out with another stimulus package to help the economy and as that signalled as per the recent monetary policy view of holding ultra-low rates for years, will also be pushing metal's strength.

3. Aggravating border tensions between India and China shall also give a boost to yellow safe-haven's appeal and also at the same time simmering US-China tensions.

4. Rising coronavirus cases across the world, with India tally now crossing a huge 40 lakh mark, will also trigger the sentiment in gold.

5. Also ample liquidity in the system, is seeing inflows into gold which is deemed cheaper over stocks.

6. The last two day's rout on the US stock indices on tech stocks carnage, gold may once again sheen with investor's risk-off sentiment gaining.

Weakness in gold's price has helped demand pick-up in India

This is as jewellers once again re-stock ahead of the festive season which kicks-off with Navratra season in October.

Volatility in Gold To Persist

On mixed cues, gold prices are set to be choppy while the lower end support shall still be lent by factors imparting positive push to the yellow-metal including likely release of another stimulus package by the US etc.

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