InvestorQ : Gold prices in Indian markets have crossed the Rs.38,000/10 gram mark. What is your view on why gold price is going up so rapidly?
Arti Chavan made post

Gold prices in Indian markets have crossed the Rs.38,000/10 gram mark. What is your view on why gold price is going up so rapidly?

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Crowny Pinto answered.
1 year ago
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Gold prices in India, like oil, are largely driven by the international prices of gold. Globally, the spot price of gold has moved above $1500/oz which is the highest level in the last 6 years. There are quite a few reasons for gold prices to be moving up. Here are some of the key reasons.

· Gold has always gained during times of uncertainty in politics and in the macroeconomic situation. Between 1971 and 1979, gold prices moved from $35/oz to $850/oz post the Arab oil embargo. In 2008, after the collapse of Lehman, there was again a shift towards the yellow metal with gold prices almost doubling to $1900/oz in September 2011. The fact is that gold normally makes the most of the uncertainty in the market.

· One of the key reasons for the sharp rise in the price of gold is the trade war that began in March 2018. China and the US are in a battle of attrition and the world economy is paying the price via a global slowdown in growth.

· The dollar weakness has also impacted the price of gold. Since gold is denominated in dollars, the price of gold normally goes up in tandem with fall in the dollar. Dollar has been weakening with rates being cut by the Fed.

· The liquidity infusion by major central banks like the US Fed, Bank of England, European Central Bank and the Bank of Japan has made the currencies of these countries brittle. Central banks are seeing value in storing their reserves in gold which explains the 70% increase in gold demand from central banks across the world.

· The close battle between oil producers and oil consumers has been going on for over 4 years now. There has been a major shift in wealth from the oil producers to the oil consumers. In the midst of all this, the US sanctions on Iran added to the oil uncertainty. All these factors are pushing gold prices higher.

· Gold is also going up due to fears of a currency war. China may have just started the currency war by letting the Yuan fall beyond the CNY7/$ mark. Economists are apprehensive that this could be the beginning of a currency war as each EMs try to devalue their way out of an economic slowdown. In such times of uncertainty, gold is the best bet, which explains the sharp rise in investment demand for gold. 



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