The flow of money into gold ETFs and the immense liquidity from central banks around the globe may push gold prices in India higher to almost Rs 65,000 per 10 grams.
Says Kishore Narne, Head - Commodity & Currency, Motilal Oswal Financial Services, "Gold and Silver have been best performing assets so far this year with 40% and 50% returns respectively so far this year. With aggressive stance of central banks to push unprecedented amounts of liquidity and keep interest rates lower coupled with reignited trade-war concerns and rising Covid-19 infections and a threat of second wave infections providing a significant hindrance to global economic growth along with lingering Geo-political uncertainty provides a convincing fundamental backdrop for continuation up-trend in both precious metals."
According to Narne, slowing jewellery demand is more than replaced by investor demand in to ETFs as well as coin and bar sales.
"We continue to be bullish on Gold with potential targets between Rs 65,000 to 68,000 /10gms and Silver expected to reach anywhere between Rs 82,000-88,000 over the next 12-15 month period, we continue to recommend investors to keep a higher allocation towards Gold and use every dip to accumulate the metal," he says
International gold prices blow past $2000
Indian markets derive prices from the international markets. Gold prices in the global markets scaled past the $2000 per ounce mark, as a weak dollar helped maintain the bullish momentum. The precious metal scaled to a new record high of $2055, generating returns of almost 35 per cent since the start of the year, making it the best asset class so far in 2020.
According to Louise Street, Market Intelligence at the World Gold Council, "COVID-19 created the perfect storm for gold investment as historic liquidity injections and record low interest rates significantly cut the cost of carrying gold. We witnessed a surge in gold price along with record inflows into gold-backed ETFs in the first half of the year."
In fact, gold ETFs saw accelerated inflows in Q2, taking first half inflows to a record-breaking 734 tonnes. First half inflows surpassed the previous annual record from 2009 of 646 tonnes and lifted global holdings to 3,621 tonnes.
The momentum in gold prices is likely to continue given the easy liquidity around the world. With international prices continuing to rise, we might see gold scale past the Rs 65,000 mark in India in the coming months.
For Indian consumers the rise in prices is not good news and many are awaiting for a fall to buy in prices to buy jewellery. At the moment, it looks unlikely it would happen anytime soon.