Analysts believe the rally for gold is here to stay and foresee a firm trend in the near term.
On MCX, August gold futures rose to a record high of Rs 48,289 per 10 gram. It retreated to Rs 47,689 per 10 gram at close, as traders locked in gains. It has risen around 23.2 per cent for the year to date.
In 2019, gold prices had risen 24.5 per cent over the entire year.
“The gloom around the pandemic has been a major driver for the gold prices this year. A bleak economic outlook for US has provided added support ,” said Anuj Gupta DVP–commodities & currencies research, Angel Broking.
The World Health Organization (WHO) on Sunday reported the largest single-day increase in coronavirus cases by its count, at more than 183,000 new cases in one day. Brazil led the way with 54,771 cases tallied and the US next at 36,617. Of these, more than 15,400 came from India.
“US is going $250 billion corporate bonds. This infusion of liquidity will also support the market,” added Gupta.
Earlier this month, US Federal Reserve announced Monday it will begin buying individual corporate bonds 85 days after unveiling after unveiling the purchase policy and alleviating intense credit-market pressures.
The program, also known as Secondary Market Corporate Credit Facility, will take in up to $250 billion in corporate bonds from eligible issuers.
“Dollar index is edging lower and that is lending support to gold. The geopolitical tensions have also aided the sentiment. There are expectations of further depreciation of rupee as India–China woes have escalated. This will also lend support to gold,” said Gupta.
The worries over a second wave of coronavirus infections has also helped the sentiment.
“There is a fear of resurgence of coronavirus, leading toi extended slowdown of the economy. There is a fear of second wave of coronavirus infections. SPDR- gold backed ETF, is seeing continued inflows, indicating investors are parking their funds in safe-haven bets,” said Jigar Trivedi, commodities analyst at Anand Rathi Shares & Stock Brokers.
Trivedi expects the domestic gold prices to breach Rs 50,000 mark over the next three months, with a caveat. He pointed that the yellow metal has seen a sharp surge over last 18 months — to the tune of around 45 per cent — so a bout of correction is not ruled out. According to him, Rs 47,700-47,200 is a good support level for gold.
The Dollar index, a measure of the greenback relative to a basket of foreign currencies, has fallen sharply that is supporting gold prices. It is around 97.38. It is down 1.4 per cent for the year to date, and sharply lower from 102.99 seen in March.
That said, the festival demand has been relatively low in India, given the pandemic.
Gupta of Angel Broking was of the view that it will not dent the sentiment as much, as investment demand remains high.
Global prices for the yellow metal are up around 15 per cent for the year to date, as investors flocked to safety amid concerns over widespread slowdown in world economy, coupled with unprecedented amounts of government and central bank stimulus that has raised concerns on inflation.
In the Asian markets, gold prices held firm on Monday, having scaled a more than one-month peak, as a resurgence of coronavirus infections in many countries raised concerns over a swift global economic recovery, Reuters reported.
Spot gold rose 0.3 per cent to $1,747.59 per ounce by 1003 GMT. Prices were around $17 shy of a 7-1/2 year high of $1,764.55 hit in May.