Gold hits new high of Rs 47,929 per 10 grams

Gold prices in India hit a fresh high of Rs 47,929 per 10 grams on Monday in spite of physical buying almost muted due to COVID-19 lockdown. The prices of yellow metal have risen almost 25% since March when they hovered around Rs 38,500 /10 gram.

The US-China trade tensions and pandemic aside, the prices of the yellow metal will keep moving northward as long as central banks around the globe maintain their interest rate cut spree and release huge monetary stimulus to keep the economies afloat.

“Easy money will always look for a safe haven. The huge monetary stimulus comes with a risk of inflation that devalues currencies, bond yields also come under pressure due to monetary easing that forces investor to move to gold” Ajay Kumar Kedia of Kedia Advisory told DH.

India gold rates moved up in tandem with global rates. Global gold rates touched a seven-year high after US Federal Reserve said on Monday that the US economic recovery could stretch through 2021.

The dismal economic data and fears of pandemic stretching for longer than expected have kept the gold rates soaring. Heavy buying of gold by central banks across the globe is supporting upward gold prices. A world Gold Council survey recently showed 20% of central banks intend to increase their gold reserves over the next 12 months, compared with 8% in the 2019 survey. Central banks across the globe have added 650 tonnes to their reserves in 2019 alone.

The WGC says the continuation of expansionary monetary policies owing to the COVID-19 pandemic, will likely keep interest rates near zero for the foreseeable future. Falling interest rates may prompt central banks to look more closely towards gold.

Other reasons for the gold rally are the heightened concern over fiscal sustainability of economies amid the health emergency, which is fast turning into a financial crisis.