Gold Set to rally on Diversification Demand

The gold price has reached its highest level in almost eight years due to financial market concerns about the corona crisis. The price of the precious metal is on the rise this year as investors are looking for safe havens to invest in because of viruses giving hope to the top gold dealer in India.
Gold rose to the highest in more than seven years after the Federal Reserve said stocks and asset prices could suffer a significant hit from the coronavirus pandemic, and warned the process of economic recovery may stretch through until the end of next year.
On one side , national Economic council Director Larry Kudlow said on Friday that U.S and China were working on implementing the deal and on the other hand , U.S President Donald Trump declared that he was “not thrilled” with the phase one U.S.-China trade deal reached in January

And if that was not enough, the Trump administration blocked chip supplies to Huawei Technologies, with investors on edge fir a reported possible Chinese retaliation.

The price of a troy ounce of gold (31.1 grams) is now around $ 1760, the highest level since October 2012. The price continued to rise following warnings from President Jerome Powell of the US Federal Reserve about the economic damage caused by the corona virus can cause.

Gold and silver broke higher this week as we started to see the dreadful damage done to the global economy from many weeks of inactivity. Precious metals look set to rally further on safe-haven and diversification demand making bullion dealers in India hopeful.

Monday’s gain in gold came in after data released Friday underscored how hard virus-related shutdowns have hit the world’s largest economy. U.S. retail sales and factory output registered the steepest declines on record in April.

The coming months are likely to see a wave of bankruptcies, major negative corporate earnings revisions and with that, the risk that unemployment will remain stubbornly high. Self-imposed social distancing will keep the whole experience industry from travelling and exhibitions, to restaurants and cinemas under pressure for months to come.

Furthermore, Commercial real estate could be among the hardest-hit industries should the health crisis deepen, the U.S. central bank said in its twice-yearly financial stability report Friday. Separately, Chairman Jerome Powell said in an interview with CBS that a full recovery of the U.S. economy could drag through 2021 and depends on the delivery of a vaccine.
Meanwhile, U.S. Federal Reserve Chair Jerome Powell warned in a “60 Minutes” interview that the U.S. economy could shrink up to 30% in the second quarter. Although the U.S. could avoid a second Great Depression in the long run, a full recovery would depend of the development of a vaccine.
Powell also added that the Fed was willing to deploy more ammunition to aid in economic recovery if needed.

Bullion has surged 16% this year as the spread of the virus curbed economic growth, roiled markets, and prompted vast amounts of stimulus to be unleashed by governments and central banks says RiddiSiddhi Bullions Limited.

For the firm believers of bullish sentiment for gold, here are some key analyses by Bullion king of India that will strengthen their belief further-

1. Firstly, we have central banks cutting interest rates and heading to zero or lower. The Swiss National Bank, the European Central Bank and the Bank of Japan all currently have negative interest rates. For many countries, where inflation levels are higher than interest rates levels money in the bank will simply lose value year on year. Therefore, investors who have moved into cash will be looking to place their cash in a safe haven.

2. Following more than a month of range bound trading, gold finally managed to break the shackles that had kept it tied to $1700/oz. Renewed stock market weakness, a warning about the outlook from the U.S. Federal Reserve and a continued surge in the number of people joining the jobless queue are just some of the recent drivers.  In the last three recessions gold has increased in value, so as a hedge for a recession gold does have strong appeal.

3. Furthermore with large scale quantitative easing (QE) programmes undertaken by central banks around the world and some analysts anxious about high stock valuations, gold offers a hedge against such devaluing risk. QE devalues a currency, so money is literally losing value. This is why many analysts would recommend have a portion of your portfolio in gold. History may not be repeated, but the fundamental outlook for gold is currently very strong.

4. Souring U.S.-China relationship, as well as other bleak news, will lead investors to turn to the safe-haven yellow metal.

The Covid-19 pandemic remains very difficult to beat and it carries the risk of re-emerging in places where it had been knocked back. While still not under control in many countries, the U.S. and others risk a prolonged impact with some states or regions attempting to reopen before having the virus under control. RSBL gold says that the recovery is probably set to be more problematic than the optimists think, with gold set to benefit from the enormous boost to money supply that is going to follow.

Everyone wants to own gold

Gold does very well as a calamity hedge, and I think we would all agree that this is definitely a calamity right now.

In times of uncertainty, economic and otherwise, gold is considered a safe haven investment, a fact which is further being corroborated by the current movement of gold prices and demand for all forms of gold investments, be it bullion, paper gold, spots and futures says Prithviraj Kothari RSBL.
Gold performs well in any situation- inflation or deflation. We need not worry. And currently, we all know that a ton of money has been pumped into the market for recovery.
And when you look at the stock market over the last few weeks, the stock market’s gotten boastful giving bullion dealers in India some good news.
But, the yellow metal, the traditional haven of choice, has increasingly found its fate in the greenback as a competitor over the past two years when calamity struck, whether it was Covid-19 outbreaks, tumbles on Wall Street or breakdown in U.S.-China trade endeavours. The dollar and the yellow metal were considered to be inversely proportional to each other.
The same phenomenon was on a display again on Monday as both U.S. gold futures and the spot price of gold fell under the $1,700 support level, while the dollar index regained its balance on above the key 100-point mark critical to dollar bulls.

The US dollar strengthened on Monday as appetite for the US dollar as safe-haven currency increased amid concerns over economic reopening.

Gold prices extend the rebound making it look positive for the investors and the top gold dealer in India, as the risk-off sentiment seeped into Europe amid fears over the second wave of the coronavirus outbreak and escalating Australian-China trade tensions.
The dollar has been a major barrier for gold. Gold prices are very much into a consolidation phase, thanks to the US dollar.

Furthermore, The White House is suffering a mini-outbreak of Covid-19 with Vice President Mike Pence’s Press Secretary Katie Miller testing positive, while Anthony Fauci and Robert Reid, two other senior health officials on the coronavirus task force, are on self-quarantine, according to reports. Pence and President Donald Trump have tested negative so far.
On the global front, both China and South Korea reported new spikes in coronavirus cases, with Seoul recording 34 new cases, its biggest single-day jump in about a month. In Germany, the closely-watched reproduction rate Covid-19 had climbed to 1.1, meaning 10 people with the virus could infect on average 11 others.

The US dollar strengthened on Monday as appetite for the US dollar as safe-haven currency increased amid concerns over economic reopening.

Events in Korea over the weekend brought a reminder of the risks of second waves of coronavirus infections, with Seoul closing down all nightclubs after 34 new infections were tracked down to one club.

But there remain much fear in the market about how the post Covid-19 recovery will play out, none more so than assessing the challenges economies face removing restrictions amid the coronavirus pandemic.

With many countries in the West attempting to reopen their economies, attention has turned to whether new infection rates will remain low as mobility picks up.

A recent study by the World Gold Council (WGC) found that gold figures in the top five investments; people are investing more in the yellow. On average people invested 28 per cent of their income in gold in 2016, which has gone and up to 33 per cent in 2019. It also found that most people preferred to invest in gold due to "ease of buying" which has kept the top gold dealer in India positive even in these difficult times.

In the domestic market too there are renewed worries of India’s fiscal and further possible lockdown only going to deteriorate this. The ballooning fiscal deficit moved to staggering 5.5%+. This is the real dilemma for the Government of India- to arrange the deficit as high as 4.75 lac crore- which seems difficult as the GST and al otter taxes are depleting fast.

The concern surrounding an upward creep in real interest rates, as an extremely weak economy forces price expectations lower while the Fed stays steadfast to its commitment to keep Fed Funds above zero, also contributed in reducing length.
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The escalating tensions between U and China will give sudden pop-up rally to gold from$1700-$1715 initially and later maybe $1730 but a stop is crucial at $1688.

All this suggests that you may want to own gold for what’s happening now. It would certainly help if you had gold in your portfolio for the grim economic events that are yet to unfold. And you clearly want to own gold for those things we hope that never happens says RiddiSiddhi Bullions Limited.