Ever since covid-19 began in February 2020, the stock markets crashed, economy crashed and the GDP went very low. Between all this the gold price began with an upward movement. Comparing May 2019 to May 2020 there has been an upward glide of about 40%. The price earlier in 2019 for 10 grams of gold was Rs. 32,000 and it has taken a leap of about 45% + according to the current price of Rs. 53,900.
Since gold is mostly imported and due to the pandemic situation, there has been a depreciation comparing the Indian Rupee to the US Dollar, thus imports can be done at a slightly cheaper rate. In 2019, a report based on studying economic indicators indicated that after a continuous spike in the US economy, there is a possibility that US may enter into a depression after 11 years, after the financial crisis of 2008. As this depression may lead to a fall in the Dollar value, the gold rally began, and the Covid-19 impact, which has virtually led to a shutdown of major economies across the world, added momentum to the rising gold prices as a major global recession now looks certain.
Gold does not contribute to the economy, but it is considered as an efficient tool to hedge against inflation and economic uncertainties. Even if a country is going through recession, gold yet continues an upward movement. There is a possibility of a price crash only if there is a sudden sale of gold by the Central bank. And given this economic uncertainty, it is assumed that the gold prices may hit a new 52 week high.
Saurabh Gadgill, CEO and manager of the jewelry brand PN Gadgil said that there is a possibility of the gold price to rise for the next 12 months following the US elections and the disruptions caused by the covid-19 situation. “We are expecting gold to reach around Rs 65,000 per 10 gram in the domestic markets in the next 12 months, while hitting $2500 an ounce in the international markets” he opined.
Gold is considered as a safe heaven in India as it is an integral part of wedding ceremonies and is considered as a safe investment by investors during the time of uncertainties.
The current price is Rs. 54,194, and the future of gold price being traded is Rs. 53,627 and it expires on 05th October ’20.
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