Gold rises 1% to new high of Rs 48,107 on safe-haven buying, Silver adds 2%

Increasing number of Covid cases and geopolitical tensions renew investors' interest in risk-free assets

Gold price jumped by 1 per cent to set a record on Monday as intensified geopolitical tensions, spiraling Covid-19 cases, and concerns of struggling economy increased its safe haven appeal.

Standard gold in Mumbai’s Zaveri Bazaar continued its Friday rally and opened at Rs 48,107 per 10g, but closed with a marginal decline from this level at Rs 47,937 per 10g on Monday — up 1 per cent from Friday’s closing of Rs 47,462. Silver moved 2 per cent up to trade at Rs 49,061 a kg but closed at Rs 48,825 a kg on Monday.

While equity, real estate, and other such asset classes have seen uncertainty, gold has become a preferred choice for investors. In June, gold and silver prices rose by 2.6 per cent and 0.8 per cent, respectively.

“Gold prices continued upside on Monday on heightened risk sentiments with record rise in Covid-19 cases. The US Federal Reserve’s signal that the economy will take longer-than-expected to recover also supported gold prices to trade higher,” said Tapan Patel, senior analyst (commodities), HDFC Securities.

The ongoing clash between India and China, coupled with the US-China trade war and the scheduled election in the US, has raised gold’s safe haven appeal. Gold in the London spot market traded strong on Monday at $1,747 per ounce (oz) after rallying above $1,750 per oz in the morning. Gold futures at Multi Commodity Exchange (MCX) for August delivery traded up by Rs 19 at Rs 47,956, limiting upside with correction in global gold prices and stronger rupee.

 

 

The rupee appreciated around 17 paise to trade at 76 against the greenback during the day with inflows into the equity market. On the MCX, gold futures for delivery in August rose 0.7 per cent to Rs 48,289 per 10g. Similarly, silver futures contract for delivery in July rose by 1.2 per cent per cent on MCX to Rs 49,190 a kg.

“Gold has seen a sharp increase in investment demand over the past few weeks as bulk consumes pumped in fresh money to raise their gold holding in the yellow metal by moving away from riskier assets. Gold has become a safe bet for institutional investors with global central banks increasing purchases. Gold would continue to move up to hit $1,800 an oz in the international market and Rs 50,000 per 10g in Indian currency,” said Sriram Iyer, senior research analyst from Reliance Securities.

Indicating risk-averse sentiment among investors, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund (ETF), said its holdings rose 2.03 per cent to 1,159.31 tonnes on Friday from 1,136.22 tonnes on Thursday.

“Rising gold prices have hit retail demand. Consumers have been hit by job losses, pay cuts, and dwindling business activities due to the lockdown. Since Unlock 1.0, retail jewellery stores opened in India but very thin activity was reported,” said Kumar Jain, director, Umedmal Tilokchand Zaveri, a bullion dealer and jewellery retailer in Zaveri Bazaar.