‘Safe haven’ gold hits a new high of ₹50,181; silver crosses ₹60,000-mark

Riding high on its safe haven status, gold continued its bullish trend and touched a new high of ₹50,181 per 10 gm on Wednesday as other investment avenues face uncertainty triggered by the Covid pandemic. Silver crossed the ₹60,000 a kg mark but pulled back marginally to close at ₹59,170 on profit-booking.

Taking a cue from the global markets, gold opened on a strong note at ₹50,220 against the previous close of ₹49,440 per 10 grams. In fact, gold prices have gained by ₹1,295 from ₹48,886-level logged on July 1.

Investors chasing the over-priced equity markets are betting big on gold as an hedge against economic uncertainty. However, the increase in prices has further dampened the domestic gold jewellery demand, which is already at a historic low. Consumers are also postponing purchase of jewellery with salary cuts and retrenchments across sectors.

Economic uncertainties

Suvankar Sen, Executive Director, Senco Gold and Diamonds, said gold prices have been rallying on the back of uncertainties brought on by the Covid situation. Revival in gold demand may take a while to happen, but it is definitely a good long-term investment avenue in the current scenario, he added.

“With huge unemployment and economic slowdown leading to money printing presses going on an overdrive globally, we expect volatility in gold to stay,” he said.

Betting on the firm trend, gold for August delivery on the Multi Commodity Exchange touched new high of ₹50,085 per 10 gm but pulled back to close at ₹49,527 on profit booking in the first half of the trading session.

Earlier, Comex Gold in the US rose by $26.50 an ounce to nine-year high of $1,844 on the possibility of a fresh stimulus in the US and Europe, besides growing tensions between China and the US.

Sriram Iyer, Senior Research Analyst, Reliance Securities, said international spot gold prices have risen 5 per cent over the last month on investment demand and weak US dollar.

“We see more upside in prices, tracking firm overseas prices supported by fundamental factors such as low interest rates, unprecedented quantitative easing by central banks and investment demand,” he said.

Kishore Narne, Head, Commodities & Currencies, Motilal Oswal Financial Services, said: “We expect the anaemic economic growth to intensify protectionist policies and aggravate trade wars, which would support high gold prices. We suggest investors to use every dip to keep buying gold over the medium-to-long-term targets of ₹65,000.”