After a dramatic fall, gold prices have recovered on expectations of the adverse impact of the second Covid wave that is ravaging economies across the world. The resurgence of Covid has come when the global economy was limping back to normalcy since late last year.

In Mumbai, spot gold prices jumped by ₹3,387 or 8 per cent on Friday to ₹47,615 per 10 gm against ₹44,228 in March-end. Analysts expect prices to hit ₹50,000 per 10 gm in the next three months as the surging inflation is set to pose fresh challenges to economic recovery.

Ishu Datwani, Founder, Anmol, said the uptrend in gold prices is expected to continue as some of the factors that have triggered the price rise such as the Covid uncertainty and the hostile situation in Russia and Ukrainian are still prevalent.

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This apart, the US government is expected to announce more stimulus to support the tottering economy, he added.

Gold prices in Comex, the division of Chicago Mercantile Exchange, have increased after US President Joe Biden’s new tax proposal to raise the federal income tax for individuals making over $1 million per year to almost 50 per cent. This proposal, if implemented, could fuel another rally in gold.

Spot gold in Comex hit a two-month high of $1,798 an ounce and fell marginally to $1,793 on Friday.

India demand dives

Domestic gold prices have been following the firm international trend even as demand in Indian markets has dipped to near zero after the Covid restrictions announced in various States. Moreover, consumers are keeping away from gold jewellery purchase due to the fear of unexpected health issues.

“The entire area where I live has been cordoned off as containment zone. Covid has taken two of my neighbour’s lives. Though my sister’s marriage is slated by this year-end, we are not thinking of buying gold jewellery,” said Santosh Dhaktode, a manager with Mumbai-based logistics firm.

“We expect jewellery stores to open by the middle of next month and see the demand starting slowly towards May-end, but picking up during the festival season and peaking by Diwali,” said Datwani. However, the partial lockdown in Mumbai has tightened supply of jewellery to smaller towns.

Vaibhav Saraf, Director, Aisshpra Gems and Jewels, said the lockdown in major manufacturing hubs such as Mumbai and Delhi has made it difficult to get supply and impacted delivery to consumers. “We had to keep extra inventory and incur higher capital cost due to this,” he added.

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