Gold prices surge 2% to hit new record as investors rush for safety

Crude oil and silver follow suit, metals recover on LME following China's favourable trade policy

Gold prices in India jumped by over 2 per cent on Monday following global moves to de-escalate geo-political tensions in the Middle East which multiplied with the US bombing in Iran.

Standard gold in Mumbai's Zaveri Bazaar jumped to trade at Rs 40,678/10g on Monday as compared to Rs 39,931/10g at its previous close on Friday. Silver price also moved up to trade at Rs 47,955/kg on Monday versus Rs 47,330/kg on Friday.

Gold in India was up nearly 4 per cent in two trading days Friday and today.

Global investors have been investing aggressively in gold as a safe haven asset following instability and economic slowdown.

Although some of the key equity markets have also moved up, investors including global central banks increased their gold holdings resulting in gold price breaching all previous records during calendar 2019. At the current price, gold has yielded 29 per cent returns since January 2019; and 20 per cent and 4.3 per cent since July 2019 and January 2020, respectively.

“Gold price is approaching Rs 41,000/10g now, the record which we estimated it to achieve by June 2020. In dollar terms, gold is currently trading at $1575/oz due to safe haven buying from investors following escalating geo-political tensions. With strong fundamentals in its favour, gold price is set to rise further to the next resistance levels of $1615/oz and $1650/oz in the short term,” said Gnanasekar Thiagarajan, Director, Commtrendz.

While gold in the international markets hit the highest in six years, silver surpassed the level it set 7 years ago after Goldman Sachs in its report termed bullion as a better bet than oil. The report further said, "History shows that under most outcomes gold will likely rally to well beyond current levels."

Instability in the Middle East, the major source of global energy supply, has also driven brent crude oil up to trade at $70/barrel on Monday, a rise of 32 per cent since January 2019 and 5.4 per cent so far this calendar year. Rupee depreciated 0.8 per cent to Rs 71.98 against a dollar on Monday.

Meanwhile, copper and other base metals on the London Metal Exchange (LME) recovered today a part of their decline on Friday after China – the world’s largest consumer – announced trade policy, easing trade tensions with the US. Base metals moved up by upto 0.5 per cent in early LME trade on Monday.

Consumers, who need to buy jewellery despite high prices, are opting for platinum jewellery. Some are also opting for diamond-studded gold jewellery to keep the share of gold price lower in the cost of jewellery.

Consumers in India have also started purchasing two-tone jewellery to beat gold price inflation.

Meanwhile, Manoj Kumar Jha, Director of Kamakhya Jewels believes that steady diamond prices over the last few years have made diamond-studded gold jewellery affordable for Indian consumers this wedding season with jewellers offering deep discounts on making charges.

“Available in limited set of ornaments, gold and platinum two-tone jewellery is in demand this wedding season. The number of consumers opting for two-tone or studded jewellery has doubled in the last few years to over 20 per cent now from below 10 earlier,” said Ramesh Kalyanaraman, Chairman and Managing Director, Kalyan Jewellers.

Echoing similar views, Rajiv Popley, a city based jewellery retailer said, “Platinum is nearly 25 per cent cheaper than gold. So consumers are looking for colourful jewellery in a combination of yellow with white or pink gold and yellow gold with platinum.”