The yellow metal is having its run considering the global pandemic across the world. India being second largest consumer of gold after China, has proven time and again that 2020 is one of the most ferocious rallies the yellow metal market has ever seen. The main driving force has been real rates that continue to plummet and don’t show signs of easing anytime soon.
Gold which can be seen as a safe investment whenever stock markets across the world falls apart, is also considered as an fixed asset while for many Indians its an adornment, is highly liquid, no one’s liability, carries no credit risk for investors and is scarce, historically preserving its value over time.
Will yellow metal reach its zenith?
The so called “safe heaven” price trend mainly depends on US bond markets which is no where seen to be recovered soon, as the virus is still raging and the economic recovery is stalling. Investors are looking for safe havens that won’t lose value which is providing a sustained boost to gold which could go up to Rs 65,000 per 10 grams in the next 18-24 months.
Moreover, as China’s GDP quickly converges to U.S. levels helped by the widening gap in Covid-19 cases, a tectonic geopolitical shift could unfold, further supporting the case for our $3,000 target over the next 18 months.
The main driving force for Gold that investors were concerned is stagflation, a rare situation where period of rising inflation but falling output (economic growth rate slows) and rising unemployment.
Overall, yellow metal has also recently been trading in a pro-risk regime, while the USD has largely been ignored. This week, however, the USD has emerged as a major theme driving price action, which contrasts with recent behavior. According to analysts if this situation continues till the end of November U.S. elections, then there is tunnel for gold in the end of road.