India is suddenly seeing a Goldrush of a rare kind. Gold is trading at a 9-year high and silver at a 4-year high.
At MCX, the commodity exchange, MCX Gold hit INR 51,010 per 10gm, up by INR 310, on July 25 compared to the previous day. The same day, futures contracts on MCX for silver rose by INR 31 to INR 61,331 per Kg compared to the earlier day.
Nish Bhatt, Founder & CEO of investment consulting firm, Millwood Kane International, cited four reasons saying, “A weak US Dollar, a recovery plan worth 750 billion Euros in the European Union, an expectation of US Fed keeping interest rates near record low level by 2022 end, and issues related to the continued spread of the pandemic are the key reason for the rally in precious metals”. The situation has been augmented by the fall in the value of other asset class and global uncertainties have also helped Gold climb record high levels, he says.
Another reason for surging buying interest in Gold is rise in Institutional buying. Majority of the Big Institutional investors have turned bullish on Gold due to its safe-haven feature during the current health crisis the global economy is suffering from. More and more asset allocation from the Fixed Income players is happening into Gold as the rate of return from the debt papers have either slowed down or has fallen into negative territory.
According to informed sources, the US Dollar (USD) has entered into a 6-7 year long weakening cycle. An atmosphere of economic uncertainty, lower interest rates, falling bond yields, sustained liquidity push from many central banks and expanded fiscal balance sheets have all worked in tandem to push up prices.
Precious metals are in demand from so-called big investors. Some experts believe that Silver may better than Gold in next 6-8 quarters. After being a laggard for the last few years, silver has seen massive buying interest. The surge in its shareholding, falling mine supply and high physical and industrial demand has been supportive of the prices. Experts think that the metal has still enough steam left and can add further gains towards INR 64,000 a Kg in the near future and also move towards a life-time high crossing INR 74000 per kgs in the next couple of quarters.
Navneet Damani, VP – Commodities Research, Motilal Oswal Financial Services, (MOFS) Says, “Over the last few months we have been seen a sustain run-up in gold giving over 25% returns for this year and taking the total gains for the last two year to over 45 per cent. We expect the momentum to continue with and could deliver a handsome 30 per cent returns targeting INR 65000/10 gms. over the next 18-24 months”.