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Gold hits new high as investors scramble for safe haven

Last Updated 20 February 2020, 15:09 IST

A weak rupee on Thursday sent gold prices hitting a new high of Rs 42,000 per 10 grams in India as investors scrambled for safe haven in times of uncertainties arising out of coronavirus outbreak.

Gold has been on the rise throughout the globe in the past week despite dollar breaking higher against several major currencies.

The safe-haven demand for gold has been increasing as investors fear the coronavirus impact on global businesses may stay longer than expected.

“In India, particularly, gold has been rising due to wedding season. Of late, digital buying of gold has seen an increase,” Ajay Kumar Kedia, MD, Kedia Advisory, told DH.

In the international market, gold continued to trade a seven-year high on speculation that the US Federal Reserve will go for an easy monetary policy before the year-end. A strengthened dollar index, however, took some sheen off gold.

A drop in cases of coronavirus in China and expectations that demand will soon revive in the world's second-largest oil consumer, kept Brent crude prices on a high, too. At one point on Thursday, it traded at a one-month high of $59.60 per barrel.

If the upward movement in crude and gold prices is sustained, it could increase India's revenue-expenditure gap and delay economic recovery.

The Reserve Bank of India has flagged inflation risk due to an upward movement in prices of the two commodities, for which India pays in dollars.

“Upside risks include a rise in gold prices, fluctuations in oil prices due to geopolitical tensions, and an increase in input costs for services. Disruptions in the supply of Chinese imports due to the spread of coronavirus may also exert pressure on prices of goods imported from China,” the RBI said in the minutes of its monetary policy committee released on Thursday.

Crude prices are also rising due to the Organization of Petroleum Exporting Countries (OPEC) considering a supply cut.

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(Published 20 February 2020, 15:01 IST)

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