Gold prices inch closer to Rs 50,000/10gm mark

Thanks to the coronavirus-induced global economic uncertainty and the developments surrounding it, the price of gold — the precious metal generally accepted as a safe haven asset and a hedge against inflation — is on a roll again.

On Thursday, the price of a near month futures contract for gold on the MCX surged past the Rs 47,250-per-10gm mark, an all-time high level. Additionally, it is inching closer to the psychologically important Rs 50,000 level. Currently, due to the nationwide lockdown, trading in gold in the physical markets has stopped. But is continuing on the commodity futures exchanges. Hence, the futures price is taken as a proxy to physical price of gold.

Given the factors that could push its price further — ample global liquidity, economic uncertainty, depreciating currencies and central bank purchases — analysts say the price of the yellow metal could rally for another 30-35% before taking a breather. The month of July 2019 could be taken as the beginning of the current rally in gold when the price was at about Rs 32,200 level. Now, in less than 10 months, the price has appreciated 46% to its current level, data collated by TOI showed. And a 35% rally from here could take the gold prices to around Rs 64,000 level.

Motilal Oswal Financial Services associate director & head (commodities & currencies) Kishore Narne said gold has given phenomenal returns in one year due to slowing growth and falling interest rates globally. “Now with the Covid-19 coming into the picture, shutting down of economies could eventually lead to collapse of broader economies. The coming years will see enormous push of liquidity from central banks through printing of money and massive expansion of fiscal deficits, leading to depreciating currencies, which provide the perfect backdrop for continuation of the rally in gold,” he said. “We continue to see gold repeating returns of 30-35% for the next two years as well.

Indian gold prices reached an all-time high, but a large part of this has been driven by the depreciating rupee and increased import duty. But international gold prices are still lower than the all-time high (recorded at $1,900/oz in 2011) and so has much room to grow from here,” Narne said. In 2019, some of the large central banks including Russia, China, India and Turkey together bought 658 tonnes of gold. Of this, more than a third was purchased by Russia itself.

Courtesy: Times Of India