Gold prices rose Rs 741 to Rs 50,181 per 10 gram to hit a record high in the Mumbai bullion market on weakness in dollar and expectation of further stimulus from central banks to revive pandemic-hit economies.
The rate of 10 gram 18, 22 and 24-carat gold in Mumbai was Rs 37,636, Rs 45,966 and Rs 50,181, respectively, plus 3 percent GST.
The expanding balance sheet of major central banks will boost demand for gold over dollar debasement and prices may see a déjà vu effect from 2010-11.
The dollar index hit a low of near 94.61 on July 22, the lowest since September 2018, amid reduced safe-haven buying and concerns about rising US virus cases.
US-Sino relations further deteriorated after the US told China to close its consulate in Houston in three days citing a need to protect American intellectual property and information caused a bout of risk aversion.
White House officials and top Congressional Democrats discussed a next round of coronavirus relief that would include extended unemployment insurance and more money for schools.
In economic news, Japan’s factory activity contracted for the 15th straight month in July, indicating economic pain from the coronavirus.
Market participants will keep an eye on the preliminary PMI numbers expected from major economies scheduled later this week.
Experts told Moneycontrol that concerns over rising coronavirus infections and global uncertainties continue to support the precious metals pack.
Kishore Narne, Associate Director and Head, Commodities & Currencies, Motilal Oswal Financial Services, said the brokerage has revised its in 18-24 months targets to Rs 65,000/10 gm from Rs 42,000. “We continue to maintain this target as the fundamental backdrop which has driven gold over the span of last four months — lower interest rates, negative rates in few economies, enormous amount of liquidity and expanded fiscal balance sheets of governments which are trying to push growth amid the COVID-19 pandemic — continues.”
He suggest investors to use every dip to keep buying gold over the medium to long term with a target of Rs 65,000/10 gm.
Navneet Damani, Vice President, Motilal Oswal, sees domestic prices hovering in the range of Rs 49,450-50,200 per 10 gram. “The broader trend on the COMEX could be in the range of $1,835-1,870/oz.”
The gold-to-silver ratio currently stands at 84.80 to 1, which means the amount of silver required to buy one ounce of gold.
Silver prices jumped Rs 4,320 to Rs 59,170 per kg from its closing on July 21.
In the futures market, gold touched an intraday high of Rs 50,085 and low of Rs 49,727 on the Multi-Commodity Exchange (MCX). In the August series, the yellow metal has touched a low of Rs 39,200 and a high of Rs 50,085.
Gold futures for August delivery gained Rs 376, or 0.73 percent, at Rs 49,890 per 10 gram in evening trade on a business turnover of 7,017 lots. The same for October delivery was up Rs 399, or 0.80 percent, at Rs 50,071 on a business turnover of 12,716 lots.
The value of the August and October contracts traded so far is Rs 5,030.26 crore and Rs 694.79 crore, respectively.
Similarly, Gold Mini contract for August rose Rs 340, or 0.69 percent, at Rs 49,899 on a business turnover of 8,881 lots.
At 12:23 (GMT), spot gold was up $16.65 at $1,858.49 an ounce in London trading.