How Will Gold Perform In October-December Quarter Of 2020?

Brace for uncertainty and high volatility

As we ushered into the quarter, the different commodities including gold, oil despite contraction in price in the September month managed to end higher on account of weakness in dollar which was at multi-year lows.

Also, as per experts, September month raised some red flags.

Here are all the factors that will add to the choppiness in gold going ahead:

1. Ravaging coronavirus situation:

The pandemic is not slowing and in fact has aggravated in Europe and some US cities. While the government's there are reluctant to enforce complete lockdown any worsening may be highly impeding for the global economies, with recovery taking still further time. In India, death toll due to coronavirus has already surpassed 1 lakh mark, making India the third nation to see these many deaths.

2. Uncertainty on release of second US stimulus:

US second stimulus is being mulled upon and while policymakers are working on pushing it through, unless any decision is taken, the situation shall remain uncertain

3. Brexit conundrum:

The UK as well as European Union (EU) are trying on making progress on post-Brexit trade terms, nonetheless, UK's proposal of internal market bill has lent further uncertainty.

4. US-China trade tensions still escalating:

Gold prices which saw upward trend last year primarily on the back of continuing US-China trade tension can still move higher lifted by the same trend this year too as the tension do not seem to recede and in fact seem to put a threat on the partial trade deal reached earlier this year.

5. US Presidential elections:

Now with top US aide Trump contracting coronavirus the outcome from Presidential elections in the US become all the more hazy. And after the first Presidential debate that was a yet heated affair there is mounting uncertainty relating to outcome of the US elections.

6. World’s strongest person now Covid 19 positive:

This instance is however seen to ignite rush to gold perceived to be a ‘safe haven' amid economic and geo-political turmoil. Amid such an instance where there is also a threat to Trump's re-election there is anticipated a sell-off in the stock markets and rush to ‘safe havens' amid high uncertainty, which could see gold to rally from further here.

Conclusion

All in all it shall be a roller coaster ride with no perceived clarity on any of the issues discussed above. So, investors should be taking positions in the yellow metal gold on sharp sell-off (accumulate gold in a staggered way and keep the maximum allocation in one's portfolio at maximum 10%), which in the Indian markets slumped to below Rs. 50000 per 10 gm levels only lately after having hit record highs of Rs. 56,200 on the MCX for gold futures in early August.

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