Gold is now among the preferred investments as it has outperformed all other major asset classes this year. The report noted that this surge in prices is due to a rise in ETFs investments and not the traditional jewellery demand from consumers.
Gold prices rose in early trade on Friday following weakness in the equity market and choppiness in the US dollar. Following an overnight plunge in the US markets, Indian share markets fell one and a half per cent. Besides, India continued to report the highest number of daily coronavirus cases which supported the yellow metal’s appeal. On MCX, gold October futures were trading Rs 158 or 0.31 per cent higher at Rs 50,908 per 10 gram, while silver December futures were trading Rs 36 or 0.05 per cent down at Rs 66,926 per kg.
Analysts believe gold may remain choppy as US equity markets are showing some vulnerability to correction while the US dollar index is attempting some recovery. “We, however, expect buying interest to emerge at a lower level as Fed’s dovish stance and mixed US economic data may limit upside in the US dollar. The focus would be on the US Non-Farm payrolls data due to be released today,” said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.
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Last month, MCX gold and silver hit their respective highs of Rs 56,191 per 10 gram and Rs 77,949 per kg, respectively, mirroring the international trends. Global gold prices have rallied for the eighth consecutive month in August, according to the latest CARE Ratings report. While India gold rallied for seven straight months till July and shed 3.26 per cent in August. A host of factors supported global gold prices in the month of August such as geopolitical tensions, government stimulus package announcement and surplus liquidity in the global financial system.
Gold is now among the preferred investments as it has outperformed all other major asset classes this year. The report noted that this surge in prices is due to a rise in ETFs investments and not the traditional jewellery demand from consumers. In the week ended August 21, 2020, inflows in gold-backed ETFs stood at $ 1,195 million and with this, year-to-date inflows reached new highs of $74,092 million. Recently, sovereign gold bonds (SGB) are gaining traction In India as they are available at an issue price which is better than the price of physical gold.
India holds 10th highest gold reserves in the world
On the global gold reserves front, a total of 35,018 tonnes of gold is held as reserves and of this, 10,773 tonnes are in the Euro area, the report noted. As per the World Gold Council (WGC), the US has the largest official gold holding with 8,134 tonnes, while India is ranked at 10th position with 658 tonnes of gold. Countries such as Germany, Italy, France, the Russian Federation, China, Switzerland and Japan have greater gold holdings than India.
Most of the Indian cities have entered into the unlock phase and August 2020 has marked the onset of the festive and wedding season in the country, CARE Ratings said that this could temporarily increase gold demand for Indians. It further highlighted that the growth may not be consistent, as all celebrations are expected to stay muted this year and the rising metal prices could act as a deterrent in consumer’s gold purchase decisions.