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The demand for gold jewellery is expected to dip sharply. But this decline will be accompanied by a surge in investors looking at the yellow metal as a safe haven due to the pandemic-induced economic slowdown.
“Looking to the forecast for the year, a rise in scrap supply will help boost total supply by 3 per cent offsetting a slight contraction in mine supply, and while the impact of Covid-19 on the physical demand is expected to dissipate over the course of the year as countries slowly win the battle over the virus, the economic impact is likely to weigh heavily on the annual demand numbers and be a drag for some time,” said Cameron Alexander, Director of Precious Metals Research at Refinitiv. He was speaking at the Refinitiv India Data Connect Webinar.
Retail investments likely to jump
“Jewellery demand in particular will be hard hit, forecast to slump well over 40 per cent this year, while retail investment jumps 15 per cent as investors look to gold for its safe haven appeal. After a recent easing Exchange Traded Fund, demand is expected to rise again towards year-end, with well over 1,000 tonnes of fresh inflows forecast for 2020,” he said.
Commenting on price volatility, Alexander said, “Price wise and looking ahead, gold may remain vulnerable to further losses in the short term as markets are being impacted by movements in the US dollar, particularly should the Covid-19 crisis continue to deteriorate in the West and emerging markets and if we see another meltdown in equity markets. Such a correction would lead to yet another bout of liquidation across all asset classes, including gold.”
Gold rebound
“Having said that, with heightened uncertainty and expectations of the global economic recession, unprecedented levels of stimulus from central banks around the world and interest rates remaining at historically low levels and in negative territories, we believe that gold will rebound to even higher levels. We forecast gold to average $1,785 per pound in 2020, with a possibility to test and move beyond $2,100 per pound later in the year,” he added.
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