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Global gold rates inches to 6 yr high, surge may continue

Date: 25-06-2019
Subject: Global gold rates inches to 6 yr high, surge may continue
Chennai: Global gold prices are inching towards a 6 year high. On Monday, it stood at $1406.2 per ounce, up by $6 in a day. In India, gold price for 24 carat gold was traded at Rs 35, 210 per 10 grams. The US Fed has just signalled a rate cut and the European central bank has also signalled for a rate cut next month. Analysts add that given the US-China and UK facing issues due to Brexit, an unstable market has led to gold being considered a safe asset leading to aggressive buying. 

While domestically, the price has crossed the Rs 35,000 mark, experts foresee a drop in rates post the budget. “One has to take into the account the rupee-dollar value, which currently stands at Rs 69.2. However, once the budget comes in and new polices are announced, the rupee is expected to appreciate,” said Chirag Sheth, research consultant, South Asia, Metals Focus — an agency that provides data for World Gold Council. Industry observers expect the rupee to rise to Rs 67 per dollar by the end of this year. “Gold prices, however, would remain high for the next 2 years. It would be an advantage for investors — especially those looking to invest in ETFs. We also see a 30%-40% jump in the number of people looking for investments, ever since the rates stated going up,” said Vishal Jain, head ETF, Reliance Nippon Life Asset Management.

However, the ratio of jewellery buying versus investment is likely to remain largely undisturbed, says Sheth. “Currently, 78% of the gold purchase in India is through jewellery. And even if prices don’t go down significantly, nothing would deter the wedding purchases,” he added. While the medium term outlook seems positive for gold, in the short term, jewellers are offering deep discounts to keep the demand running. Even as domestic prices are likely to reduce, global rates would just shoot higher as central banks insist on buying gold. They have been on an aggressive purchasing spree, add experts. “Select Asian and European countries are playing a big role in increasing the gold reserves. China is the world’s largest foreign exchange reserve holder and has recently joined the global central bank gold rush by increasing its gold reserves. In the past, China has been reluctant to diversify its US $3 trillion reserve position into gold, but now have decided to make the change as a “safe haven hedge” amidst geopolitical risks,” said Kishore Narne, head of commodity & currency, Motilal Oswal Financial Services.

Source: timesofindia.indiatimes.com

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