Gold continues to attract investors

 Gold has always been considered a hedge against inflation, currency debasement and uncertainty. The yellow metal has gained 25% this year, driven by massive global stimulus to cushion economies from the pandemic-induced slump.

In spite of new stimulus measures, the U.S. and global economies are not expected to significantly recover until there is a vaccine for the coronavirus, which some health officials say won't be widely available until the summer next year.

In general, gold still looks positive and strong as it has a long way to go. While COVID-19 cases in the US are levelling off, the disease is still a major concern in countries such as India and Brazil, European cases are rising again, and health officials are worried about combating COVID-19 in flu season. Further, equity valuations seem historically elevated, US-China relations are worsening, and the potentially contentious US presidential election is looming. But growth has rebounded strongly. And with the improved prospects of vaccine approval, top gold leaders in India and analysts at RiddiSiddhi Bullions Limited remain overweight global equities over fixed income.

This environment of meagre growth will keep inflation pressure muted, which means real interest rates might not go much lower than current levels, concerns that a steep rise in COVID-19 cases could lead to renewed lockdown measures and hinder the global economic recovery might extend some support to the USD's status as the global reserve currency.

Gold prices edged up on Thursday after U.S. President Donald Trump reignited hopes of a coronavirus stimulus package before the Nov. 3 elections, but a strong dollar kept the metal's gains in check.

Spot gold rose 0.3% at $1,906.15 per ounce during the trading session. Trump said he would agree to go higher than the $1.8 trillion that the White House has offered in coronavirus stimulus to strike a deal.

Furthermore, even with the government expected to pass a new aid package before the end of the year, the U.S. economy will see only marginal growth until at least the summer of 2021, until the COVID-19 pandemic is under control.

However, once the global economy starts to pick up that is when investors should start to pay attention to inflation fears and that will be an important factor for gold.

Regardless of volatility, some experts recommend holding a gold allocation of 1% – 5% of an overall investment portfolio, and such a position may make even more sense against the current economic and political backdrop. Given the flexibility of the investment, you can hold the precious metal in a myriad of ways that can pay off in the long run. From buying gold-related stocks to the yellow metal itself, even a small position can have a big effect on overall performance amidst an unpredictable market.

Gold remains as volatile as ever. Even (or perhaps especially) in the face of an uncertain future, a little gold in your pocket—and your portfolio—can go a long way.

Gold is going to be driven by the tone of the U.S. dollar. The big move is going to probably occur after the presidential debate when we have a better read on where the polls are going to be sitting.

Another significant aspect that can play a key role in influencing gold prices- with so many UK property companies putting a freeze on withdrawals by investors, liquidity risk is now rising – and not just in the UK.

Gold’s traditional role as a safe-haven asset means it comes into its own during times of high risk. In these instances, when liquidity may fall for other investments, gold can act as a genuine diversifier over the long term

The following will play a key role in producing some meaningful trading opportunities fir the yellow metal.

The US macro data

broader market risk sentiment

US stimulus headlines,

Ultimately the macro factors that have driven investors to seek the yellow metal's warm embrace will keep investment capital flowing into gold well into next year.

Markets remain perplexed

Gold has risen about 25% this year, supported by massive stimulus by governments and central banks worldwide as the metal is seen as a hedge against inflation and currency debasement. On and off we have been receiving news that are acting as pull and push factors for gold.

Following suit, last week, markets went in to perplex mode after U.S. President Donald Trump tested positive for corona virus. In spite of the global uncertainties surrounding this news, markets continued it remain bullish for gold as there are many key data releases and events lined up for the week. 

A lot of speculation has been surrounding gold lately. Economic data, stimulus package, presidential debate, China data and now the Trump news- it all seems like a rollercoaster for gold. 

Gold dropped to levels below $1900 an ounce and then managed to pull back and was seen trading around $1900 an ounce on Friday.

The bullion kingof India remarked that it was obvious that Trump’s corona virus news will create panic in the market, leading to uncertainties and pushing gold higher. But there was positive news over the weekend, that Trump has been recovering positively and hence we were expecting gold to stabilise.

Gold inched up on Monday as the dollar weakened, although gains were limited as news that U.S. President Donald Trump, receiving treatment for COVID-19, could be released from hospital boosted risk sentiment. Spot gold was up 0.1% at $1,900.46 per ounce by 0954 GMT. U.S. gold futures were down 0.2% at $1,904.50.

Top gold analysts and top gold dealers in India are of the opinion that gold alone will not be the only one to be influenced. Any news in those lines will also have a direct effect on stocks too.

Gold and stocks are trading together. There is going to be a lot of uncertainty, and there is a risk that investors will choose to liquidate their positions just to protect themselves in case some negative news is releases in the days to come.

It seems that current scenario looks best for speculation. Trump has symptoms but he is recovering positively. News released by the doctors treating him, will surely be a market stabiliser.

With Trump in quarantine for the next two weeks, all eyes will be

• The vice-presidential debate on October 7 between Vice President Mike Pence and Joe Biden's running mate Kamala Harris, according to analysts.
• Federal Reserve's September meeting minutes, this will also be released on Wednesday.
• Any news regarding interest rate hike prospects progress on stimulus package
• In terms of data, there is the U.S. ISM non-manufacturing PMI on Monday and jobless claims on Thursday.

We have always seen that first two weeks of October are always good for gold. Firstly there I sell off post Labour data and in the domestic markets too, gold’s demand rises during the festive season. Gold generally rallies during this time.

And even if there is a fall in prices, investors still consider this dip as a buying opportunity for gold. Both ways, it will be a win-win situation for gold.

Investors believe that gold has the potential to climb back to $1980 over the uncertainties prevailing in the market.

Sentiments are strongly bullish for Gold

Time and again, gold has enjoyed a safe haven status, and in the current pandemic scenario, investors are always on the verge of safe places to park their funds. Hence sentiments for the yellow metal have grown bullish, supported by demand and hence some analysts believe that currently gold has been overbought.

Furthermore, weakness in the dollar and low U.S Treasury yields are expected to provide further support to gold. The price of gold has extended its correction from the record highs above $2 070, registered in the first week of August. Despite this, there is no reason to panic and as long the price of gold is above $1 800 this precious metal is in the “buy” zone confirmed the spokesperson from RSBL.

The price of gold may be ready to advance higher as Federal Reserve announced that will keep interest rates lower for longer to support the economic recovery

U.S Fed kept the interest rates unchanged, as expected. The latest FOMC statement and economic projections signal are that the interest rates will stay at zero until the end of 2023. This is excellent for gold. 

On Wednesday, the Federal Reserve issued a statement regarding the FOMC meeting, which was held from September 15-16. The US central bank kept the interest rates and the conditions of its quantitative easing unchanged

U.S. weekly jobless claims report on Thursday showed a smaller-than expected decline in new claims, weighing on the dollar and bolstering the appeal of gold as an investment alternative.

The unemployment rate is forecasted to be around 7.6 percent in 2020, compared to the 9.3 percent seen in June. The fact that the recovery has progressed quicker than expected is bad news for the gold prices. But still, the overall economic activity remains well below the pre-pandemic level.

U.S. data also showed that more Americans submitted unemployment claims than forecast, with 860,000 initial jobless claims against the estimated 850,000. The data also showed that almost 30 million Americans were claiming unemployment benefits as of the end of August.

When it comes to the PCE inflation, the FOMC now sees higher inflation in 2020 (1.2 percent) than June when they expected only 0.8 percent. However, the FOMC projects that the inflation rates will be below their target until 2023, which is an excellent excuse for continuing their dovish monetary policy, thus supporting gold prices while the dollar declines.

Last week's trading saw gold forming its high in Wednesday's session, here doing so with the tag of the 1983.80 figure. From there, a decent decline was seen into Thursday, with the metal dropping down to a bottom of 1938.20 - before bouncing off the same into the weekly close.

Gold prices gained on Friday buoyed by a weaker dollar and lingering concerns over an economic recovery from the damage inflicted by the coronavirus pandemic that were underscored by elevated weekly U.S. jobless claims data.

Spot gold climbed 0.6% to $1,953.80 per ounce during Fridays trading hours and was on track for a second straight week of gains, rising 0.7% during the day.

RiddiSiddhi Bullions Limited confirmed that sentiments are strongly bullish for gold as markets expected prices to rise higher and even hover in that zone for a long time.

An environment of negative real interest rates, uncertainty over the global economic future and global uncertainties, such as the upcoming U.S. presidential election, are among the reasons that have pushed investors to build up their gold holdings.

Meanwhile, in the domestic markets, market participants await prices to stabilise as the festive season begins.  Hopes prevail in the markets that demand might rise, over price stability. 

All eyes on Fed Meet

Time and again, gold has been considered as a safe haven asset. In recent times, gold did deviate from this notion in March, as its prices fell following a crash in global stock markets.

This deviation underlines the uncertainty that gripped investors that month, with some gold owners presumably selling bullion to cover losses or to increase cash holdings.

But the past 3-4 months, have brought a significant  rally in gold prices. Though gold witnessed a few dips, but it managed to bounce back.

Last Friday, gold closed at $1,938 per ounce, up $14 for the week on excellent volume, considering it was a holiday week. During the trading week, gold showed excellent stability, closing the four days trading within a $20 range from high to low.

After reaching an all-time high of $2,070 on August 7th and seeing a selloff (profit taking) on August 12th, taking the price down to $1,870, we are now seeing base building. 

Last week gold had weakened over news of renewed vaccine. This hope triggered a strong DOW Fut at +285 and whole Asian markets mood lifted owing to that. The Oxford and Astrazencia vaccine trial resumed, but the number of patients across U.S, India, France and Brazil continued to rise. Some worrisome news came from France where initial talks of 1 week shut-down were under consideration. Moreover, Israel will also be doing it shortly. So, these are new dangers for the global post-Covid growth that is being factored by the markets. 

Gold rose to its highest in nearly two weeks on Tuesday, propelled by a softer dollar and expectation that the US Federal Reserve will reinforce its accommodative monetary policy.

Spot gold rose 0.6% to $1,968.94 per ounce on Tuesday, having earlier climbed to $1,971.71, its highest since Sept. 2. 

Once again gold was riding high over bullish sentiments. In the past five sessions, gold had four positive closes and it continued to rally on Tuesday morning. 

Gold (XAU/USD) built on Monday’s 1% rally after a steady start on Tuesday, reaching fresh nine-day highs at $1967. 

The main highlight in the past few days were-

• an improvement in the risk-sentiment

• courtesy of the vaccine hopes

• upbeat Chinese data 

• renewed US-Sino trade optimism

A good sign in the ongoing global crisis were the Chinese activity numbers that came in stronger than the estimates, suggesting the economic recovery is gathering steam. China’s industrial production in August was up 5.6%, year-on-year, and up 1.0% from July. Meantime, U.S. industrial production rose 0.4% in August from July, failing to meet expectations for a 1.0% rise in the period. However, July industrial production was revised up 0.5%, to a 3.5% rise from June. Also, news that China extended tariffs exemptions on some of the US good imports further fuelled the market optimism.

But markets were more focussed on the events lined up this week.

Gold futures on Tuesday headed higher and aimed for a second straight gain as investors awaited dovish statements from global central banks that are likely to support bullion buying in the midst of the global coronavirus pandemic.

There are going to be important policy decisions from major institutions- The Federal Reserve, Bank of England followed by Bank of Japan.

Bullion dealers across India and around the world as well as investors are expecting policy makers to promote a regime of low interest rates for a prolonged period to combat COVID-19, which could lift both gold and stocks further, commodity analysts forecast.

Given the current situation, central banks are expected to convey a dovish message to the markets which would further result on higher gold prices.

Prithviraj Kothari of RSBL suggests that market participants now await the U.S. Fed’s two-day policy event which ends on Wednesday, its first such meeting since Chairman Jerome Powell unveiled a policy shift towards greater tolerance of inflation, effectively pledging to keep interest rates low for longer.

Gold should be brought strategically

Gold has always been considered inversely proportional to other assets in its class- equity, debt, real estate etc. Amongst all these, gold has always given better returns during risk-off periods. The reason why gold enjoys a safe haven appeal is that it protects investors’ capital against tail risks and other events that have an adverse impact on capital or wealth.

During this pandemic too, gold has been seen performing significantly well across all asset classes. Precious metals prices continued their three-month long uptrend amid the COVID-19 pandemic. Demand for gold has been buoyed by safe-haven buying and global policy support in response to the pandemic. However, we saw gold fall sharply as the news of Russia discovering a vaccine came in.

The world is eagerly waiting for the discovery of a covid-19 vaccine in the hope that normalcy will return soon after. While experts say that it will definitely boost the economy, the impact may not be positive for all investment asset classes. For instance, gold, which has had a dream run this year, may correct, while equity might see a rally in the short term as it may have already factored in the vaccine discovery event. Experts believe that gold prices may correct post after a vaccine is approved.

Gold had a substantial run over the past one year and as no asset class can move in a straight line forever, gold prices are expected to correct as soon as an approved vaccine is discovered. However, the resurgence of patients in Europe is a brutal reminder that the pandemic is not over yet and that the second wave is only a couple of months away.

Prithviraj Kothari believes that such a second wave would be positive for gold prices. However, it should include the US as well, as the resurgence in cases limited to Europe could strengthen the greenback against the euro and gold, neutralizing the increased safe-haven demand for the yellow metal.

-If the second wave occurs, it should be bullish for gold not only because of the resulting economic slowdown and increased uncertainty but also because of the new stimulus programs that would probably be announced by both by the central banks and the governments.

And hence, sentiments for gold remain bullish. Following these sentiments, Smart investors are rightly buying gold, recognising it to be a hedge and/or a store of value during uncertainty. While demand for jewellery and physical gold has taken a hit, the focus is on the investment forms of gold. Even the central banks of the world, recognising the risk involved, are adding to their gold reserves. Gold, as you may know, plays an important role in central banks’ reserve management.

The top gold dealer in India opines given the on-going extreme turbulence in the equities, gold holds the potential to provide respectable returns.

Precious metals prices are expected to average 13% higher in 2020 relative to 2019 on expectations of strong demand due to heightened global uncertainty and ultra-low real interest rates. Upside risks to this outlook include a second COVID-19 wave causing a sharper-than-expected global slowdown. On the downside, a stronger U.S. dollar could push prices lower.

Particularly now when there is no imminent end to the Covid-19 pandemic, the spotlight will continue to remain on the precious metal.

Until the Covid-19 pandemic is contained and economic uncertainty prevails, the spotlight will continue to remain on gold. It makes good sense to buy gold strategically. The long-term secular uptrend exhibited by gold highlights the importance of owning gold in the portfolio with a longer investment horizon.

Gold looking for guidance from Central bank policy meeting amid 50 Days left for US elections

Gold has taken up a holding position in the $1900s after setting a mark just above $2000 an ounce in August, and this week's Federal Reserve meeting will continue to affect the next step of the haven. The two-day meeting — with the statement and Jerome Powell's Wednesday press conference — It just comes a few weeks after the Fed chief explained the Bank's new approach to fulfilling its dual mandate by embracing a more optimistic approach to inflation. Powell at the time described the long awaited change as "a robust update."

Officials will also update their economic and rate predictions in September, but the framework review may have taken the most of its thunder. U.S. central bankers will measure where they see rates going into 2022 in their common "dot plot" chart, but most Fed watchers and analysts across the world as well as top gold dealers alike have already expected rates remaining at zero well before the Fed's framework review has solidified that hunch.

There’s good and bad news. Before lifting prices, the Fed will be vigilant as it expects the recovery to speed up. But the bad news is that it does not have a lot of ammunition left in its arsenal to support the economy if it winds up in need of more aid — at least in the manner it may need aid. Officers say they 're left with more firepower, and they do.

In addition, the Bank of Japan and Bank of England will take decisions this week, all on Thursday. The US presidency fight is entering the home stretch as the electoral tradition that doesn't have a global peer hits the final 50 days before Election Day. The threats of U.S. presidential elections are expected to be more pronounced in investor decision making when there are now just 50 days until November 3^rd. In commodities, that matters most for gold and silver traders says PrithvirajKothari of RSBL.

With Joe Biden ahead in the polls, Donald Trump has consistently suggested that there will be fraud without proof, claiming mail-in votes would result in theft. That's sparked a tide of chaotic, disputed speculation that unleashes market uncertainty. In recent weeks, Gold 's remarkable, record-setting run has seen its strength wane, even as equities have been rocked by a selloff. The quickly shrinking horizon to Election Day can inject some fresh enthusiasm into the safe-haven, boosting holdings in the ETF.

Why does Silver Outperforms Gold in Bull Market

Silver prices have underperformed gold for most of the time since 2011. In the third week of July 2020 silver prices broke out of the $14 to $20 price range in which they have been caged for the most part since the second half of 2014. After breaking out of this long held range, silver prices raced sharply higher, rising to an intraday high of $29.9 on 7 August basis the nearby active September COMEX contract. If past performance is any indicator, this could be the start of another sharp run up in silver prices. And past performance has been a fairly consistent indicator in illustrating that silver prices outperform gold in a time when gold prices are rising sharply, a gold price rally.

 When using the same dates as gold, silver outperformed gold on every occasion but one (more detailed discussion on this later). When using silver’s troughs and peaks that were close to or ‘in the same cycle’ as the periods of gold price increases, silver always outperformed gold and the percentage gains were also much stronger than when using the other time frame.

There are several reasons why silver often lags gold in starting a major upward price move, but then rises faster in percentage terms. One of the most important is that the silver market is significantly smaller than the gold market. In 2019, for example, the dollar value of the gold market was around 5.5 times that of silver. {The market size for gold and silver is defined here as the summation of annual physical supply (comprised of newly refined mine output, secondary recovery from scrap, and in the case of gold net official transactions in those years when the official sector has been a net supplier of gold to the market), futures and options exchange trading volume, and London Bullion market clearing volumes.}

The top gold dealers of India believes that given the smaller size of the silver market it takes less effort for investors to move the price of the metal higher or lower. The smaller size of the market essentially increases volatility, which while supportive of outperformance compared to gold when prices are rising also adds risk to the performance of silver as a stand-alone asset and to any portfolio in which precious metals are included.

After years of underperformance relative to gold, reflected in the sharp increase in the Gold: Silver ratio, the silver price is now playing catch up with gold. The ratio has slipped lower but is still at historically elevated levels. Furthermore, while the daily gold price broke its past record and already has made several new ones, the price of silver at the height of its current run up on 7 August 2020 at $29.91, still is 39% below its record high in 2011.

The ratio has been at extremely elevated levels in recent years, highlighting silver’s low valuation relative to gold for an extended period of time. In March 2020 the ratio hit a record high. The ratio has corrected from those record high levels but is still at elevated levels, suggesting more potential upside for silver prices relative to gold. It should be understood that there is no magical number at which this ratio should stand. There are no physical, geologic, chemical, electrical, financial, or other reason why gold and silver should be expected to trade at a given relationship to each other.

Gold/Silver Ratio

Sustained dollar weakness is a primary prerequisite for silver beating gold. A greenback bear market would imply some reversion in its top companion for most of the past 10 years -- the U.S. stock market outperforming the world.

Investor sentiment toward silver is turning extremely positive confirmed Prithviraj Kothari of RSBL. This positive investor sentiment is being driven by investors looking for a hedge to the heightened political and economic risks around the world coupled with silver’s relative value to gold. Additionally, the recent break out of silver prices is likely to attract generalist investors looking for relatively undervalued assets to park their funds and the negative yield on the 10-year TIPS certainly makes assets like gold and silver attractive. The upcoming U.S. election, Brexit, deteriorating U.S. –China relations, and the pandemic give further reasons for investors to add gold and silver to their portfolios, which should help sustain the strength in prices.

While silver prices could potentially rise back to their record levels, they may not be able to sustain those high levels for an extended period of time, with some of the shorter term investors locking profits and fabrication demand being hurt by the high price. That said, while prices may not stay at those past record levels for too long and will come off they should not be expected to sink back to the levels experienced in recent years, or even earlier this year, in any hurry. The fallout from the pandemic should help to keep the prices of these metals at elevated levels for a long time.

Gold ETFs attract record inflows in 2020

 

Inflows into gold-backed ETFs have broken all records in 2020, with total holdings reaching an all-time high of 3785 tonnes at the end of July, leaving the value of global assets under management standing at $239 billion. That’s a couple of tons ahead of Germany’s stash. U.S. reserves exceed 8,000 tons.

Global net inflows of 899 tonnes ($49.1 billion) in the year to July are considerably higher than the previous record annual totals and the trend of inflows has continued in the first few trading days of August as the price of gold has breached $2000/oz.

To put these flows and holdings in perspective:

·         ETFs now hold more gold than any one central bank barring the US Treasury.

·         Inflows in 2020 have exceeded the record annual purchases by central banks seen in 2019 of 667t.

·         ETF inflows in the first six months of the year were equivalent to about 40% of new mine supply.

ETF Inflows of last 20 years

There are two principal reasons why ETFs have seen such strong purchases in 2020, both connected to the corona virus.

·         As the global economy tipped into deep recession, falling bond yields – especially negative real US Treasuries’ yields – have driven gold prices higher, encouraging investors to buy gold, sometimes via ETFs.

·         The logistical issues that triggered the dislocation of the COMEX gold futures market from the OTC market centered in London have reduced the attraction of investment on the COMEX futures market, due to increased costs of ownership and higher premiums to the OTC price.

RSBL analysts and investors are so concerned about the global outlook that worldwide holdings in gold-backed exchange-traded funds now stand behind only the official U.S. reserves of bullion after they surpassed Germany’s holdings.

Long term drivers remain intact for gold

 GOLD turned quite bearish over past few days, as the USD surged higher, after losing a lot of ground in the previous weeks. There was not much change in the market sentiment, so the move didn’t come from Gold, but from the USD, since the Buck made some strong gains against all other instruments.

Gold ended a remarkable nine-week rally, as it declined for the first time since June. The yellow metal briefly fell below $1,900 an ounce last Wednesday as stocks neared their all-time closing high and the 10-year Treasury yield jumped on record supply. Wednesday’s $38 billion auction of 10-year government bonds was the largest in U.S. history. The troy ounce of the precious metal closed the week with small losses at $1,940. 

Top gold dealer in India were devastated to see gold dropped to its lowest in over a week and was on its way for a  second straight weekly decline on Friday, as a strong rebound in the dollar and a resurgence in U.S. business activity hurt bullion's shine. 

Prices have witnessed a wave like movement over the week due to 

• weak positioning 

• delayed stimulus package agreement

• a bounce in the U.S. dollar and 

• real rates

Gold reached its life time high but then consolidated last week as news surrounded the onset of corona virus vaccine. Adding to this positive news, were signs of improving global economies as all have entered the unlock phase and reviving towards the path of growth.  Bullions posted consecutive weekly losses for the first time since June. On Monday it headed towards the third decline says RSBL Gold

US markets rallied over Trumps statement of extending support to the economy. 

So, USD index also showed signs of pull back to take out big resistance area at 93.30-93.50. 

Gold prices are quoted lower once more at $1926 an ounce on Tuesday, pressured by a more robust U.S. Dollar. 

This week we have important data releases which might change the momentum for gold- positive or negative would depend on the following numbers- 

• second-quarter GDP data from Germany

• Durable Goods Orders will be featured in the US economic docket

• Jerome Powell, Chair of the Board of Governors of the Federal Reserve System, will be discussing the Fed's monetary policy framework in his opening remarks.

The price of gold consolidated after trading to a fresh record high ($2075) in August, but the macroeconomic environment may keep the precious metal afloat as the Federal Reserve appears to be on track to retain the current policy at the next interest rate decision on September 16 gives relief to top gold dealer in India.

Despite the correction, gold continues to remain bullish over the following drivers-

Inflation- Historically, inflation has been constructive for the gold price. As the purchasing power of the dollar falls, savers and investors may seek other, more reliable stores of value, including the yellow metal.

Debasement of currency-  when a lot of money is printed, the dollar gets devalued and gold rises against the dollar. Gold rallied while debasing the currency as we are printing trillions and trillions of dollars to spur the economy. In the process the dollar comes under pressure and strengthened gold

Interest rates-  Falling real yields and a weakening USD have seen investor demand surge. We see this demand remaining strong for the foreseeable future amid a challenging macro backdrop. The expansion of central banks' balance sheets shows no sign of abating, while US-China tensions escalate. 

This should see interest rates remain low, leaving further upside to gold prices. It’s important to keep in mind, though, that the metal’s long-term drivers remain intact assures RSBL Gold. We have unprecedented monetary and fiscal stimulus, with more potentially on the way.

Important week for gold

 Now that gold has crossed the $2000 mark, investors are expecting it to head towards $3000. 

Gold is in high demand by investors and this is keeping the rally alive in gold. 

Even though gold was pulled down around 2% on Friday, the macro economic factors have still managed to push gold prices higher. Global monetary and fiscal stimulus is the key drive behind gold price rally. 

After a drop in prices this Friday, gold managed to bounce back as the week opened. Gold prices steadied on Monday after a steep fall in the previous session, as concerns over a worseningCOVID-19 pandemic and intensifying U.S.-China tensions underpinned the metal's safe-haven appeal.

In any kind of uncertain financial crisis gold is considered as the best asset to keep inflation at bay. In 2019, after the Federal Reserve signalled that it was suspending plans to push interest rates higher, gold mounted another ascent. Historically, gold has done best when interest rates falling below the rate of inflation. As the inflation-adjusted return on bonds turns negative, investors feel comfortable owning gold as a store of value, even if it yields nothing.

That is what has been happening over the past few months. With bond yields near zero in the United States and negative in Europe and Japan, investors have driven up the price of gold more than 30 percent this year after a gain of nearly 20 percent last year. In recent weeks, that surge has been turbocharged by growing expectations that all the money governments are pumping into their economies will reignite inflation.

Currently the need of the hour is to stabilise economies by providing financial support. And in the need to do so, gold and silver are going up. Printing of money is positively affecting precious metals stated Mr Prithviraj Kothari of RSBL. 

As interest rate go lower or negative, investors have money in the bank that will be essentially taxed as they’d have to pay interest on it.  This is why people are buying gold, taking delivery of gold bars, and buying future

On one hand we have the uncertainty of the virus and on the other hand, we have the fiscal stimulus negotiations. The passage of another major stimulus package would likely mean more money printing, weaker U.S. dollar, and higher gold.

This week has a lot in store for gold-

Another major driver for gold next week will be rising tensions between the U.S.-China, especially after Trump signed a pair of executive orders that prohibit U.S. residents from doing business with China’s TikTok and WeChat apps.

Important data releases- the U.S. PPI , the U.S. CPI , the U.S. jobless claims,  the U.S. retail sales and industrial production data on Friday.

U.S. President Donald Trump said that he might be getting involved if no agreement is reached by signing an executive order to extend enhanced unemployment benefits and impose a payroll tax. 

Furthermore, U.S. President Donald Trump signed executive orders on Saturday partly restoring enhanced unemployment payments to the tens of millions of Americans who lost jobs in the pandemic, as the United States marked a grim milestone of 5 million cases.

RSBL as well as all the top gold dealers of India are planning to keep a close watch on the important numbers being released this week as it will create a significant impact on gold and silver. 

The situation can't get more supportive for gold

Well to begin with, my last blog has justified its title- Will gold cross its life time high? Yes, it did and how. It managed to breach $1917 and create fresh highs at $1955 on Thursday. 

Amid profit taking and as investors’ appetite for riskier assets improved after the Federal Reserve pledged to use all the tools to support the US economy, US policymakers left monetary policy unchanged and warned that the ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. Also, traders continue to monitor negotiations on the $1 trillion stimulus package proposed by Senate Republicans on Monday, rising coronavirus infections and US-China tensions.

Gold is on course for its biggest annual increase in more than a decade, driven by concern over the coronavirus pandemic and damage to economies, with gains supported by negative real yields and a weaker dollar. 

The dollar ’s slide comes as the U.S. lags most of the world in controlling the spread of COVID-19, and some expect the country ’s economic recovery to lag others, including Europe. The prospect of mounting U.S. deficits as a result of continued fiscal stimulus and ultra-low U.S. interest rates have also put the dollar under pressure.

U.S.D index at 93.6, fell more than 6-7% in the past 6 months and with pandemic and bitter U.S- China relations, there is increased historical pressure on USD to sustain its global currency status.  Riding on the dollar weakness, gold has managed to rise by $500 in the past 5-6 months. December contract hit $2000 an ounce and thereafter we had a massive profit taking to drop by $75, though it showed recovery again. 

The much awaited FOMC meet, proved to be more or less neutral for gold. Fed’s chairman Powell was vocal in saying that their efforts on to every possible support as and when desired for the ailing US economy. So, this is a clear sign that US economy is going to see more plunging as Covid related issues are hurting the growth very severely. 

We are already in a bull run that has started swiftly since the past 6 months and is expected to continue for long, a fact very strongly believed by the bullion king of India. There could be a correction of $70-$80. All the top gold dealers of India are convinced that if the global economic scenario continues to remain weak then the sentiments continue to remain bullish. Gold is also rising because investors are seeking havens as the virus ravages the global economy. 

The situation can’t get more supportive for gold. The low interest rates will give you a benign dollar and a benign dollar is very helpful to gold prices because it makes it much more affordable globally.

Gold continues to an investors favourite

As we all know, gold bas outperformed many assets in the current year. Gold is up about 19% so far this year, as lower interest rates and central bank stimulus have supercharged existing upward momentum for the precious metal.

According to many analysts, the one factor that will continue to drive gold prices higher in the near term is further weakness in the U.S. dollar as the current embarks on a new downtrend.

Gold is typically seen as a “safe haven” asset in times of uncertainty because it is less volatile than other investments, like stocks. What’s more, the metal moves inversely to the U.S. dollar, meaning that when the greenback moves lower — as it has done lately — gold moves higher.

Gold is benefitting from the geopolitical situations and the pressure that has been created worldwide.

Globally, gold prices edged lower on Monday due to a stronger US dollar, but worries over surging Covid-19 cases and its impact on the global economy kept the safe-haven metal above the psychological level of $1,800 per ounce.

Though gold was struggling to keep momentum above $1800, several analysts as well as the top gold dealers in India believe that market has a lot of upwards potential and support for gold.

The gold market is consolidating above $1,800 an ounce and although bullish sentiment has fallen from record levels, market analyst and retail investors remain bullish on prices next week.

Major economies have been struggling on the path of development and are constantly announcing new stimulus measures to support the economy. The virus continues to weaken the global scenario, but U.S and Europe have been trying to pump in fiscal stimulus to keep the growth going. This step will weigh on the U.S. dollar and support gold prices.

Although there is strong sentiment in the marketplace, some analysts and industry insiders from RSBL have noted that a correction would be healthy following break above long-term support.

U.S markets are languishing for the past 2-3 days and with no major economic data expected till Wednesday, gold and silver are expected to maintain the same stance- mild pull back and positive momentum.

Small dips can be considered as an opportunity to add gold to your portfolio confirms Mr Prithviraj Kothari of RSBL

The precious metal has reached a new range of $1,750-$1,830 in July, up from the May-April range of $1,668-$1,750, If gold break the upside, then $1,850 and even $1,900 is possible.

Right now, gold is consolidating but we can see higher prices next week as major data is expected to be released after Wednesday.

·         U.S House price index

·         U.S. existing and new home sales

·         U.S latest jobless claims

·         U.S Manufacturing PMI

All the above-mentioned data is important and needs observation as it will give investors an idea whether we are seeing an actual recovery or not.

Currently gold prices are benefiting from

·         loose monetary policy,

·         low real yields,

·         record inflows into exchange-traded funds

Gold is expected climb to an all-time high in the next six-to-nine months, and there’s a 30% probability it’ll top $2,000 an ounce in the next three-to-five months.

If gold can break the $1,829 resistance, then the precious metal could be heading for its all-time highs.

The scene is set for gold

Last week, gold gained significant momentum as its prices pushed to the highest level in eight years.
Gold went through another volatile week with an attempt at breaching the $1,800 an ounce level. The yellow metal wrapped up a very exciting trading week after seeing prices hit 7.5-year highs and climbing to $1,796.10 on Wednesday.

If gold continues to rally at this speed then it will soon reach the significant level of $1900- its life time high that it achieved in 2011, RSBL confirmed. This is a very significant level for Gold because it would be very close to breaking the 2011 all-time high level near $1917.90. As gold creeps higher because of perceived risk factors in the global markets, once Gold price levels break above $1850, then the rally to levels above $1900 is almost certain to drive investors into the precious metals markets at a much faster pace.

Prithviraj Kothari of RSBL believes that history repeats itself- the current situation that is being witnessed is more or less similar to what happened in 1976. In early 1976 through 1981, capital markets were suddenly awash in credit and precious metals rallied more than 700%.
Similarly currently the US Fed and global central banks are pumping financial stimulus into the markets (in the form of capital and QE functions) in an effort to support the capital markets and financial sector.

So now we can think where precious metals are heading.
Now this uncertain and risk-ff sentiment in the market has been helping the yellow maintain stay firm on bullish sentiments. Though the strengthening dollar is taking away some shine from the yellow metal, but rising Covid infections is dampening this dollar gold effect.

It was the rise of infections from the coronavirus in the United States and globally that elevated concern that the pandemic could force many countries including United States to roll back the reopening. Last week, the total cases in the US reached 2,374,282, with casualties reaching 692 on a single day, summing it up to 121809 deaths in total.

A number of states including Arizona, New York, Texas and Florida have had the largest number of new cases reported, putting US on the front with the highest number of Covid cases and deaths. As of early June 26, the U.S. has recorded 2,422,310 cases and 124,416 deaths.

Concerns around how this will impact the U.S. economic recovery has led to another major stock market selloff on Friday, pulling down equities.

Though uncertain recovery will prove to be good for gold, but a steep rise in Corona cases can hamper gold’s growth as ultimately it comes to inflation expectations. Hence gold also dropped along with equities and failed to cross $1800.

But the future is bright for gold. And we are not claiming this because of the pandemic. Apart from that there are several reasons that can set the prices high and help gold in crossing its life time high-

• U.S. Presidential elections- the U.S. presidential elections will play an important role in shaking gold prices. 
• Q2- There is a lot of pressure around the economic recovery in the U.S., which points to a higher price for gold going forward
• Data-biggest market moving day is likely to be Thursday with the U.S. employment report for June and factory orders for May both being released. With all states now experiencing some form of reopening, we should see another sizeable pick-up in employment, as workers return to their jobs, but still many remain unemployed and hence the jobs report won’t be that strong. Other important data slated for release- the FOMC meeting minutes from June, ADP nonfarm employment change for June, and the ISM manufacturing PMI for June. , U.S. pending home sales and June’s CB consumer confidence

RiddiSiddhi Bullions Limited opines that the analysts believe that economic numbers coming in from US won’t be that appealing, its time to buy gold as prices is expected to rise.  We all know that since ages gold has been considered as a store of value. Currently, gold is undervalued as there are massive bubbles in asset markets and central banks continue to print money, which supports these bubbles. This is an unsustainable situation; and when the bubbles burst the gold price will rise.
The scene is set for a price appreciation towards levels last traded in 2012.  All eyes should be on the psychological $1800 mark.

Gold strikes a balance

The yellow metal has fallen around 0.3% this week. But still sentiments remain positive. Growing concerns over US China Trade war, escalating Sino-India tensions along with the ongoing Covid widespread- all these together have helped gold in maintaining its price range and has further supported positive sentiments for the same confirmed RiddiSiddhi Bullions Limited.

On one hand gold witnessed buyers at $1710 -$1750 levels, while it also some jumping into the selling bandwagon. Gold seems to have attained a balance between geopolitical and COVID-19 concerns on one side, and economic recovery hopes and dollar strength on the other.

There are growing concerns that the US-China Phase One trade deal is about to get ripped-off U.S. President Donald Trump on Thursday renewed his threat to cut ties with China, a day after his top diplomats held talks with Beijing amid souring relations. China has told state-owned firms to halt purchases of major US farm products, after Washington said it would eliminate special treatment for HongKong.

While this was on the global front, on the local front we saw widespread protests in the United States over racism. Furthermore, concerns of another wave of coronavirus cases has created panic. More than 8.38 million people have been reported to be infected by the coronavirus globally with China reporting 32 new virus cases on Friday, 25 of which were reported in the capital city Beijing.           
 
A surge in fresh infections in several U.S. states and the imposition of travel curbs in Beijing to stop a new outbreak have renewed fears of a delay in economic recovery as countries reopen after coronavirus-induced lockdowns

Adding to this were, simmering geopolitical tensions between North Korea and South Korea, and India and China also offered some support to bullion , which is often used as a safe-haven investment during times of political and financial uncertainty.

Further, in UK too gold was seen moving upwards. There was decent stimulus being pushed into the market wherein  the Bank kept overnight UK interest rates at their new record low of 0.10% and also approved another £100bn ($124bn) of quantitative easing, taking its total holdings of government bonds to £745bn – equal to one-third of GDP and 42.5% of the UK state's current outstanding debt in issue.

In the US too, negative growth sentiments was supporting gold. The Federal Reserve is targeting 2% inflation and has pledged to keep rates near record lows until the goal is achieved. This will lead to a lift in gold prices. Looking at the dollar, we saw the greenback falling to its lowest since mid-March, further supporting bullion prices the bullion king of India stated.

News coming in from various parts of the world, which is mostly negative on the geo-political and economic front, will definitely prove to be positive for gold and hence we can expect fresh highs for the yellow metal.

Bullish vs Bearish sentiments for gold

Recession and pandemic have been good supporters for gold this year. Gold has advanced 16.7% since March 2019. Simultaneously the dollar has dropped 6.8%

All this while, gold continued to find additional support from some of the bearish factors including concerns over a second wave of infections, and raised geopolitical uncertainty.

This week too, gold found support over Federal Reserve statements. Fed ruled out any rate hikes for the next couple of years. On Wednesday, the Fed announced that it is keeping its key interest rate unchanged at a range between zero and 0.25% while signalling no rate hikes through 2022. The Fed also said it expects U.S. GDP to contract by 6.5% this year.  Simultaneously it boosted expectations that [quantitative easing] will be in operation for the time being.

In response, gold prices rallied, reaching slightly above $1,750 an ounce on Thursday while equities saw major losses. This move benefited gold as an accommodative monetary policy is negative for the yields and for dollar, while positive for the yellow metal hence gold managed to pull through the mid-range resistance band of $1700/$1725.

Any form of strong financial stimulus is made with the intention of boosting the economy. Now given the situation, the market is once again divided into bears vs. bulls for gold.
The ones, who are bearish, have cautioned that gold will remain in a tight range. Currently it has been sustained by stimulus measures world over and hence it will require a very strong influencer to pull it back into a higher range.

The Fed’s extreme money printing igniting these unstable stock-market heights is worryingly inflationary, making upping gold portfolio allocations essential.  This ongoing capital shift is likely to keep pushing gold higher. RiddiSiddhi Bullions Limited is positive that gold prices are likely to trade higher for the most part of the year.

But still many investors continue to remain in a dilemma about portfolio diversification per se gold.

Now for the ones who are bullish believe that gold is being constantly supported by the current geopolitical crisis. There has been news that the number of U.S. coronavirus infections were rising, with recent reports indicating that Arizona and Texas are showing increased cases. Moreover, worries of a new wave of COVID-19 cases clouded hopes of economic recovery.

Just when China was grounding itself towards economic recovery, it once again saw fresh Covid cases resurfacing. After weeks with almost no new coronavirus infections, Beijing has recorded dozens of new cases in recent days.  And if this was not enough, US too witnessed Covid hospitalization in record numbers.

Further, The World Bank released its latest economic outlook and global GDP which is now predicted to fall by 5.2% this year. The recession could be the worst since the Second World War. Certainly, lockdowns are being eased and central banks and governments have pledged huge sums of money to support their economies. However, the economic recovery will take quite some time and even a slightest onset of a second wave of Covid infections, will once again create a panic like situation believes Mr Prithviraj Kothari of RSBL.

This comes amid enormous federal rescue efforts, with the Treasury Department aiming to borrow $3 trillion to cover the tab. To bolster the government’s campaign, the Federal Reserve intends to buy enormous amounts of the new Treasury bond supply. This manoeuvre is called quantitative easing (QE), which also is aimed at holding down interest rates.

Investors remain bullish for gold

Gold bounced sharply from its mid-March lows as central banks slashed interest rates and launched quantitative easing, while governments undertook massive stimulus measures, in an effort to combat an economic slowdown prompted by the COVID-19 pandemic. However, gold has been largely range-bound for nearly two months now.

Investors as well as industry experts like RSBL continue to remain bullish for gold mainly due to the following reasons-

• FED - QE is “huge positive” for gold since it means a low “opportunity cost” of holding the metal. This refers to any interest income lost by holding a non-yielding asset such as precious metals instead of bonds. The Federal Reserve (Fed) will face numerous challenges in the months and years ahead. Economic output will remain below potential for years to come as we deal with the pandemic and its long-term scarring effects. An additional challenge will be a U.S. federal government budget deficit that will exceed $3 trillion this year with significant likelihood that it could be larger.                                                                                                      
• Unemployment numbers and S&P weak earning and its effect on interest rates - Unemployment is expected to remain high and S&P companies to continue posting weaker earnings. This would lead to lower (or increasingly negative) real interest rates, which is positive for gold. Absent further action by the Fed, the deluge of Treasury securities will likely start pushing interest rates higher, threatening the overall economic expansion. The Fed cannot allow this to happen.  As I gaze into my crystal ball, the Fed’s roadmap is likely to include the following progression of policy tools as the economy remains mired in a protracted downturn                                                                                                                                                          
• US Economy - With the Fed going all-in on financing the government deficit, the U.S. dollar could be at risk to negative speculation of its status as the dominant global reserve currency. Investing in gold may help offset this trend.                                                                                                                                                          
• Fiscal and monetary stimulus programs across U.S., Europe, China and other countries - this action is but obvious given the damage that COVID-19 has caused globally. As we move towards the path of recovery, which will definitely be slow, gold is expected to benefit from this.                                                                                                                                                          
• Equities - For one thing, the relief rally in equities is likely to eventually run out of steam. The economy still faces challenges, one of which is the potential for a second wave of COVID-19 infection which will further strengthen gold prices.

Gold has always been investors favourite because of its following features-

• Historical position
• Long term store of value
• Performance during times of crisis
• Effective portfolio diversifier
• High liquidity asset

Due to this, gold has gained more prominence every time the global markets face uncertainty. And we think this sentiment will carry through in late 2020-2021 says RiddiSiddhi Bullions Limited.

Gold prices should comfortably break through $1,800 an ounce, whenever the sharp rally in equities stalls,  when gold ran up to its record high above $1,920 an ounce back in 2011, the market was in “bubble-like conditions” that did not last long before the buying dried up. But in the current situation, many more economies around the globe have been impacted, meaning a recovery will take longer, in turn meaning gold buying should be more sustained.

Geopolitical crisis still remains on the cards for gold

Gold has been a major beneficiary of a weak dollar and low US interest rates over the last three weeks and this looks likely to change in the short-term. The yield on the 10-year US benchmark is nearing 1%, up from 0.65% a week ago, dulling the appeal of the precious metal, while the US dollar basket may have found a temporary base around 96.50 after having fallen by four big figures since mid-May. Bullion has declined about 3% last week, on track for its biggest fall since the week ending March 13.

Gold prices dipped more than 2% on Friday as investors’ hopes of a rebound in the global economy got a boost from stronger-than-expected U.S. non-farm payrolls data, reducing demand for safe havens.

RiddiSiddhi Bullions Limited opines that a record surge in US employment on Friday sent gold into a tail spin and back to lows seen at the beginning of May. Just over 2.5 million jobs were added in May compared to market expectations of 8 million lost jobs, the largest month of job creation since the data series began. Last month the US economy lost just over 20 million jobs. Today’s positive data boost added to an already upbeat market tone and helped push gold back into the early $1,680s, its lowest level since May 2.

The May payrolls report confounded economists who had predicted a job loss of 8 million in May as the coronavirus kept parts of the U.S. economy closed for a third straight month.

The report also jarred with separate data released a day earlier by the Labour Department, which said it received weekly unemployment claims for the first time from 1.9 million Americans, bringing to nearly 43 million the number receiving jobless insurance since the Covid-19 hit home in March. Gold prices jumped 1% on Thursday, reacting to the jobless claims numbers.

We had significantly stronger-than-expected U.S. payroll numbers - an increase of 2.5 million versus an expectation of a decline of 7.5 million - that 10-million swing has brought forward expectations of the economic recovery in the United States.

A kick-start to another rally in the gold price remains elusive. The market’s confidence that the most acute stage of the pandemic has passed in many countries has seen risk appetite improve. With investors now betting stimulus measures will bridge the gap to more normal growth. RSBL is positive and has hopes pinned to an improved economy.
The central bank has injected massive stimulus and cut interest rates to near zero to cushion the blow from the coronavirus pandemic. The Federal Reserve, the U.S. Treasury and Congress have jointly approved and disbursed trillions of dollars in loans, grants and outright aid to businesses and individuals in recent months because of the Covid-19-triggered economic downturn.

But investors still remain bullish over the medium-term. Prithviraj Kothari and many other top gold dealers in India believe that Gold might not get much more support from the Fed, but geopolitical risks, second wave concerns, and an eventually weaker U.S. dollar should keep the longer-term bullish outlook intact The macro backdrop is challenging, despite market confidence in the trend towards normalised growth. The expansion of central banks’ balance sheets shows no sign of abating, while geopolitical tensions escalate.

The otherwise safe-haven known as gold is rallying right alongside an equities markets surprisingly chock-full of momentum even as protests sweep the U.S. and deaths from COVID-19 continue to climb.

Some analysts, however, remained optimistic that gold would regain some upward momentum in the near-term despite the risk rally in stocks.

The reason being uncertainty- geopolitical issues and trade tensions (in the U.S) still remain on the cards and for the longer term these factors will definitely influence gold prices positively and those who strongly believe this and are still favouring gold are expected to benefit in the long run.

Gold - A simple investment in complicated times

As the last decade draws to a close, gold has once again demonstrated its safe haven status  and alerted the keen observer that the general situation in the financial markets is about to change fundamentally.
Gold is a clear balance to stocks, bonds and alternative assets for well-balanced investor portfolios. As a store of wealth and a multi-faceted hedge, gold has outperformed many major asset classes while providing strong performance in both rising and falling markets. Bullion dealers in India are optimistic about the continued run of gold as a safe haven for investors.

Gold can add value to your portfolio in more than one way-

• It gives long term returns
• When times are uncertain , gold acts as an effective diversifier
• It is very high on liquidity 
• It strikes a perfect balance and improves overall portfolio performance

The market continues to struggle with the elevated level of market optimism versus the real economy, creating a psychological mismatch. And while the anarchy is the US street is likely to be a short-term phenomenon believes Prithviraj Kothari from RSBL.

Gold was supported over concerns about the unrest in the United States and at the moment appear to be weighing on market sentiment along with rising tensions between the world’s top two economies.

Gold pared gains on Thursday, having risen 1% earlier in the session, pressured by an advance in Wall Street, but escalating tensions between the United States and China kept the bullion supported. Spot gold rose 0.2% to $1,712.35 per ounce during Thursdays trading hours.

Gold prices were, however, supported by fresh signs of the economic blow from the coronavirus, as well as brewing U.S.-China tensions with the Trump administration looking at options to punish China over its tightening grip on Hong Kong.  We're seeing tensions increase between U.S. and China. We see the market froth still with this bevy of negative economic data and that's clearly supportive for the gold market said the bullion king of India.

Protesters have flooded the streets in the United States over the death of George Floyd in police custody, in a wave of outrage sweeping a politically and racially divided nation.
The closely packed crowds and demonstrators not wearing masks have sparked fears of a resurgence of COVID-19, which has killed more than 101,000 Americans.
Rioting in major US metropolitan neighbourhoods got pretty gnarly over the weekend.

Adding to it were the underperforming jobless numbers coming in from the US. The latest U.S. unemployment benefits data held above 2 million last week for a 10th straight week, signalling a deeper economic hit from the pandemic. Hence investors believe that more stimuli is expected from the Federal Reserve and other central banks
           
Large stimulus measures tend to support gold, which is often considered a hedge against inflation and currency debasement.
 
Meanwhile, in Asia, China’s state media and the Hong Kong government lashed out on Sunday at U.S. President Donald Trump’s pledge to end Hong Kong’s special status if Beijing imposes new national security laws on the city.

Gold is often used as a safe store of value during times of political and financial uncertainty.
Geo political risk remains supportive amid a plethora of bullish for gold themes while anarchy in the street in the US could dent the nascent recovery. But gold investors are also taking more that early re-opening states are seeing a rebound in new cases.

On May 30, California increased 3273 claims, the highest one day increase ever. Texas increased in 1714 cases. On the margin, the United States: three-day growth of infection numbers increased to 4.2%, the highest in 1-week (vs. 3.4% three-days ago).

Gold rallied right out the gate, going higher as anarchy in the streets is not only threatening to derail the re-opening optimism but could severely dent President Trump’s approval ratings, which will heighten US election risk and could drive more demand for gold.

Gold has come down off its recent highs to trade somewhere in the middle of the range it’s been in since mid-April. This has caused many traders and investors to begin to question whether they should start looking for dips to buy, or whether there is a further downside in store for the precious metal. We’re now halfway into the year and barring any other significant global events in H2 it’s almost certain that 2020 will be remembered as the year of the virus. The question remains, though, will 2021 be the year of the recovery?

Gold continues to strengthen in second half of 2020

Gold is always considered as a valuable diversifies in times of economic and geopolitical uncertainty

A couple of months ago, the economic upswing was still firmly established, production expanded, and unemployment was declining. It all changed with the advent of the coronavirus or, to be precise: things turned really sour with the politically dictated lockdowns. As a reaction to the spread of the virus, governments in many countries ordered shops and firms to shut down and people to stay home. The inevitable result was a close-to-complete breakdown of the economic system. Whether it were smalls MSEs or giants like RSBL businesses were hit completely and so were the lives of hundreds of millions of people who were thrown into outright despair; in India alone 120 million workers lost their jobs in April 2020.

In US too, jobs numbers weren’t quite appealing.  Even though the U.S. ADP private jobs reports were stronger than expected for May and there was a decline in initial jobless claims. Still investors believe that the numbers won’t remain positive for long. RiddiSiddhi Bullions Limited agreed with the numbers projected by a survey of Bloomberg. Nonfarm payrolls are expected to drop by 7.5 million in May (compared with a 2.76 million private job losses estimated by ADP) and jobless rate is anticipated to jump to 19.1% from 14.7% in April, as per the Bloomberg's survey estimates.

Further, the precious metal was lifted by the European Central Bank's decision to expand its pandemic emergency purchase programme by 600 billion Euros

According to the bullion King of India, if the world economy continues to slip into weakness, then we can expect gold to hit a record high in the second half of 2020. A challenging economic environment and an increase in risk appetite has been a strengthening headwind for the yellow metal.