Gold Prices Surge; Expected To Rise Further Amid COVID-19 Uncertainty

On MCX, gold futures rose 1.3 percent on Friday to Rs 43,799 per 10 grams as the Indian rupee weakened. Silver futures were up by 3 percent to Rs 41,075 per kg as the rupee continued to remain above the 76/dollar level.

In the international market gold prices fell even after the US reported a record number of unemployment claims on Thursday. Spot gold and US gold futures were trading 0.3 percent lower but stayed above the $1,600 an ounce mark.

The US announced overnight that a record 6.648 million people filed for unemployment last week, much higher than analysts' expectations.

Restrictions enforced by governments around the world on its residents to stay at home to curb the spread of COVID-19 has brought economic activity to a halt. As stock markets remain subdued, investors flocked to the yellow metal, a safe haven asset in times of uncertainty.

Analysts are expecting gold prices to continue surging for the next couple of months amid the turbulence.

April-June 2020 will be best 2020 quarter for gold

According to BNP Paribas, gold's best 2020 quarter will be April-June and sees the precious metal averaging $1,675 an ounce during the period.

The prices are projected to decline to $1,610, $1,550 and $1,510 in the next three quarters, by the French banking group as "economic conditions will progressively return to normal and inflationary pressures will remain subdued."

However, other economists think that a rise in the price of gold will be challenged by the US dollar's strength and more margin-call selling for cash in the short term, keeping the rates highly volatile.

Sale of gold after 21-day lockdown

In India, jewellers interviewed by Economic Times said that they are expecting a spike in the sale of old gold after the end of 21-day lockdown as people will want to liquidate the metal for cash needs. The farming community is expected to be the biggest seller as their income was hurt by transportation constraints that disabled them to sell their produce in mandis during the lockdown.

The sale of old jewellery is expected to help the jewellers who are facing shortage due to the shutdown of refineries, mines and flight operations across the globe that have limited imports.