The Gold Prices in India are up about 30% this year. After over Nine Years, the gold prices hit almost 50,000 per 10 grams of Gold. The Factors leading to the price hike are global uncertainties which are triggered by the covid-19 pandemic such as weak dollar, low interest rates and stimulus programmes that have increased the appetite for gold.
The Gold still Remains as an Attractive Investment plan despite a big rally this year. Mark Mobius, the co-founder at the Mobius Capital said, “When interest rates are at zero or near zero, then gold is an attractive medium to invest, you don’t have to worry about not getting the interest on your gold and you see the gold price will rise as the uncertainty in the markets are rising”.
Particularly now when there is no imminent end to the covid-19 pandemic, the spotlight will continue to remain on the precious metal. Gold as an asset usually shares negative correlation with other assets such as equity, debt and real estate, and tends to perform better during risk-off periods. It Protects the investors capital against tail risks and other events that has an adverse effect on the capital or wealth.
Smart Investors are rightly buying Gold, recognizing it to be a hedge or a store of value during Uncertainty. While Demand for the Jewellery and the Physical Gold has taken a Hit, the focus is on the Investment forms of Gold. Even the Central Banks of the world, recognizing the risk involved, are adding to their Gold Reserves.
The World Gold Council (WGC) expects that financial uncertainty, lower interest rates and weakening in global economic strength will impact gold prices this year. The WGC also stated that the uncertainty brought about by the corona virus and its potential impact on public safety and economic growth could be added to the list.
Increasing concerns that the resurgence in new corona virus cases in many countries is stalling a global economic recovery and the renewed surge in tensions between the US and China supporting the safe haven demand for Gold.
UBS Group AG raised its near-term forecast for gold to reach $2000 an ounce by the end of September citing its qualities as a diversifier in a low rate world.
On the Political Front, China has ordered the US to close its consulate in the Chengdu, ratcheting up a diplomatic conflict at the time, when relations have sunk to their lowest level in decades.
