Even as gold prices remained weak, the coronavirus outbreak has severely impacted the market sentiment in the country keeping consumers away from retail stores leading to a fall in demand, according to the World Gold Council (WGC).
"Following the COVID-19 outbreak, we face unprecedented levels of anxiety globally, which has affected all asset classes including gold. It appears that volatility in gold price is driven by massive liquidations across all assets and likely magnified by leveraged positions and rule-based trading," WGC Managing Director (India) Somasundaram P R told PTI here.
Gold's liquidity has enabled people to raise their cash to cover losses in other asset classes, he added. "In spot of such volatility, gold remains one of the best-performing asset classes year to date. It may take a while until financial markets stabilise. Meanwhile, gold price too may experience further swings," he said.
However, additional quantitative easing (QE) and deep cuts in interest rates will positively impact gold, he said.
The fear of the outbreak has also led to a fall in gold jewellery purchases as the environment has severely impacted sentiments and celebrations, Somasundaram said.
"Consumer demand may soften in the first half of this year, however, once the pandemic subsides, we expect wedding preparations to resume and gold to be among the first of the asset classes to witness consumer appetite," he added.
The reasons for the softening of gold prices are the dollar's relentless rally over the past few sessions, the world markets in panic mode, plunging commodity prices and the sharp growth of bond yields over the past one week, according to technology focused stock broking firm FYERS.