With rising uncertainty due to Covid, gold could rise further: Experts
Gold prices on Multi Commodity Exchange (MCX) currently stand at ₹47,560 per 10 gram. MCX gold futures that have been witnessing a fall since the beginning of the year on the back of US Treasury yields gain was as high as ₹51,875 per 10 gram on January 6. Gold touched its peak last year in August when it traded at ₹56,200 per 10 gram in the face of uncertainty induced by the coronavirus pandemic.
On Friday, bullion went on to record a third consecutive weekly gain as it edged higher with a weaker dollar and lower US Treasury yields. Spot gold rose by 0.4 per cent to $1,790.65 per ounce, having climbed to its highest since Feb 25 at $1,797.67 on Thursday. It gained 0.8 per cent so far this week. US gold futures too recorded a rise of 0.4 per cent to $1,789.40, reported Reuters.
"The upcoming rise in inflation in April-May 2021 will most likely keep gold prices supported in the near term," Reuters cited Fitch Solutions as saying.
The 10-year US Treasury yields indicate investors' confidence in the market. Increased confidence lowers the prices thereby increasing the yields. This happens because investors feel that there is no need to invest safe and can go for higher returns yielding investments. When the treasury yields rise, gold prices fall as holding the non-interest-bearing bullion increased the opportunity cost and becomes less attractive for the investors.
However, the new surge in coronavirus disease cases in India and its induced lockdown-like measures have the potential of disturbing the investors' confidence and economic growth. The new waves of the disease are questioning the global growth hence triggering the interest in the safe havens again.
"The Covid pandemic now seems like it isn’t going away for some time, hence many fear the repercussions to economies and stocks and look to safe havens like gold to park their funds,” Brian Lan, managing director of Singapore-based dealer GoldSilver Central Pte, was quoted as saying by Reuters. “Gold now is trending up in the short term and $1,800 is an important level to breach for gold to move higher," Lan added.
(With agency inputs)