Gold prices jumped 2 per cent in the domestic markets to a new high, on Friday, following global cues. This led to domestic consumers staying away from fresh purchases, with even scheme- and exchange-related customers deferring transactions to avoid high making charges.
Standard gold in Mumbai’s Zaveri bazaar rose to Rs 42,400 per 10gm in spot trade. While most retail shops in Zaveri bazaar were shut for Mahashivratri on Friday, the ones that were open did not witness any footfall.
“There is no business, perhaps because of the sudden spike in gold prices. Even monthly deposit scheme and exchange-related customers were absent,” said Kumar Jain, director at Umedmal Tilokchand Zaveri, a bullion dealer and jewellery retailer in Zaveri bazaar.
Gold prices in India have jumped 8.5 per cent in CY20 so far, and a staggering 26 per cent in the last one year following the rise in global markets. In the benchmark London spot market, gold was trading at $1,639 an oz — the highest in seven years — in early trade, on fears of falling dollar interest rates and monetary easing by China and Japan, which has raised gold’s safe haven appeal.
US Global Investors’ CEO Frank Holmes does not rule out prices to hit $1,900/oz in the medium term and hence recommends investors to buy more gold and silver.
“The falling interest rate cycle has always supported a rise in gold prices. While the minutes of the Federal Open Market Committee in the US are yet to be out, concerns remain on the interest rate cut in CY20. In such circumstances, investors remain bullish on gold,” said Ajay Kedia, managing director of Kedia Commodity.
Interestingly, the rally in US equities took a pause and dollar has become stronger and hit its highest levels in three years against a basket of currencies on Thursday. The yen slid on economic stimulus, which questioned the Japanese currency as a safe haven.
The dollar has risen almost 2 per cent since Tuesday against the yen, reaching its highest in almost 10 months, while it has climbed to a near three-year high against the euro.
Kishore Narne, associate director at Motilal Oswal Financial Services, forecasts prices to hit $1,730/oz in the medium term, translating into a price of Rs 45,000 per 10gm.
“Expectations of further monetary easing and falling interest rates are two key positives for prices to further rise,” said Narne.
While a $250-billion stimulus to deal with coronavirus outbreak has been announced by China to prevent its economy from slowing down, analysts forecast further monetary easing. Japan has already done it recently. Further, with the Brexit date nearing, the UK may proceed with monetary easing.