Gold & Silver

Gold scales multi-year highs on gloomy global economy

Rutam Vora Ahmedabad | Updated on April 14, 2020

Big investors are dumping dollars to store money in gold, triggering a rally in gold prices   -  AFP

Futures near ₹46,500 amid sharp rally in global prices

Global economic uncertainties and weakening rupee have triggered a rush for safe havens. Fuelled by domestic and international fluidity, gold prices hit an all-time high of ₹46,385 in futures trade on Multi Commodity Exchange (MCX) on Monday.

The prices reflected sharp rally in the international prices, which hit a high of $1,757.4 an oz for April contract on the CME. Rupee weakened to ₹76.20 against the dollar amid gloomy economic outlook following the nationwide lockdown.

No physical trade

Even though the physical trades haven’t taken place due to the lockdown, the India Bullion and Jewellers Association Ltd (IBJA) quoted gold rates for April 13 at an all-time high of ₹46,034 per 10 grams. The yellow metal gained ₹6,148 within a month from ₹39,886 quoted on March 17.

On Monday, MCX Gold for June contract settled at ₹46,255 after gaining nearly ₹1,000 from previous day.

Haresh Acharya, Director at IBJA, told to BusinessLine that rupee depreciation is one trigger but there are domestic and international factors as well that are fuelling gold rally. “The gold price rally in India is a reflection of international spike. Big investors are dumping dollar to store money in gold. This is triggering rally in gold prices. The economic outlook in domestic and international economies appear uncertain, as a result there is a huge rush for gold,” he said.

Silver prices, on the other hand, hovered around ₹44,049 a kg for MCX Silver May contract. CME silver May futures crossed $16 per ounce.

However, according to industry insiders, the gold price rally may continue for another few months as long as coronavirus-prompted lockdown continues in parts of the world. This has crippled local economic activities, as well as disrupted the global trade with shipments lying stranded at various ports.

Earlier, in a statement, Krishan Gopaul, Market Intelligence Manager at World Gold Council, had commented that central banks across the globe had increased their monthly net gold purchases in January and February following December’s five-month low.

Spectacular comeback

Global bullion analysts maintained that after the US Federal Reserve’s economic boost amid coronavirus outbreak, gold prices had started tapering off. But recently, the yellow metal has gained its peak levels of 2012. According to research analysts, gold will emerge as the best performing asset class amid all this gloom.

As per various estimates, gold prices are expected to cross $1,800 in the short run and may also extend gains to hit $2,000-2,100 in a longer period. This, according to brokerage houses, will lift gold prices in the domestic market to touch ₹50,000 in near to medium term.

Published on April 14, 2020

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