Precious metals Gold and Silver started the week with strong gains as their futures on the Multi-Commodity Exchange (MCX) soared to more gains. August gold future rose by Rs 800 pricing at Rs 51,833 per 10 gram, while silver gained Rs 3,400 and was being traded at Rs 64,617 per kg.
Last week, both gold and silver prices had jumped by 4% and 15%, respectively. Gold at present is trading at a nine-year high, while silver is at four-year high. Market experts say investors are looking for safe-haven assets in the time of Covid and, therefore, the two metals are turning out to be most promising. Besides, rising US-China tension is also contributing to the price hike.
Nish Bhatt, CEO of Millwood Kane International an investment consulting firm, attributes the gain for yellow metal to a weak US Dollar, EU leaders approving a recovery plan worth 750 billion euros and an expectation of US Fed keeping interest rates near record low level till the end of 2022. He adds that fall in value of other asset class and global uncertainties have also helped Gold climb record high levels.
Notably, Indian consumers prefer to invest in gold and silver jewellery generally. The prices for both the metals vary across the country due to excise duty, state taxes and making charges. So experts suggest that before you buy your physical gold in the form of jewellery, bars or coins, please ensure the best prices are being offered.
The country currently has several other alternatives to gold jewellery. These are ETF (exchange traded fund), Gold fund of Fund, Gold mining Stocks, equity-based gold funds, gold bars and coins, to name a few. Paper gold which is trading through paper is also turning out to be a better option as physical gold requires several provisions while selling gold i.e. requirement of PAN card if the gold jewellery transaction is over Rs 50,000. Besides, a wealth tax is imposed on investments over Rs 30 lakh and the tax amount is 1% of the total investment. 20% capital tax is also imposed on physical gold and Gold ETF.
Bhatt adds that gold is traditionally used as a hedge against inflation and global economies are considering further stimulus to boost growth which may fuel inflation further. “We expect precious metals to trade firm until the number of global cases of Covid 19 is under control or a vaccine is introduced in the market which is still a few months away.”
Rahul Gupta, Head of Research (Currency) at Emkay Global Financial Services, says the rally in gold is very ferocious, and we are seeing a relentless demand for the safety from coronavirus turmoil. He says, "The political decisions to increase stimulus packages is keeping the gold prices higher. Tomorrow’s Fed policy will be closely followed, we don’t expect a rate cut. Any more accommodating stance by the Fed may continue the sharp upside in gold prices. Technically, gold prices are in over bought position and can witness profit-booking. The immediate resistance for Comex Gold spot is US $1960 and then US $1985/2000. A reversal from US $1960 may lead towards US $1880/1840. In MCX, Gold crucial resistance lies around Rs 52,500 and a reversal may take price towards Rs 50,800/Rs 50,300."
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