The price of gold has crossed the ₹40,000-a-sovereign mark (eight grams make a sovereign) as retail buyers of ornaments are putting a substantial portion of their life-time savings into gold and big-time investors are betting big on a favourable outcome, since the COVID-19 crisis is triggering lower expectations from assets such as crude, U.S. dollar and government debts.
Gold jewellery retailer Joy Alukkas says his business has seen a slowdown because of the pandemic, and not on account of the metal’s rising price. “Gold ornaments are being bought as usual,” he says. The ornaments ensure future returns and take care of current requirements, he says, pointing out that the Indian ornaments market mostly comprises seasonal household purchases, which have not been affected.
V. Hareesh, head of commodity research at the Geojit Financial Services, said the COVID-19 spread has sparked a lot of uncertainties in the market and gold is being looked upon as a safe instrument.
Government measures to ease the economy, as seen across the world, result in appreciation in the price of assets like gold. The price of the dollar has been at a historic low, prompting investors to keep off it, he said.
Suresh Gopinathan, a chartered accountant and financial analyst in Kochi, says with the real rate of return in the near negative investors are betting on gold. An analysis of investment opportunities, including government debt, did not offer great consolation for the investor in the current circumstances.
A market analyst said the prices are likely to climb. There is an overall gloom. “The prospect of other assets making up for past losses is almost unthinkable now,” he says. However, retail investors in gold must realise that the price of the metal may not rise on these lines in the future, he warns. Unless another global crisis comes around, a rate of appreciation of this nature is unlikely, he added.
The World Gold Council has said in its report that gold jewellery demand has plunged owing to the pandemic-induced lockdown in activities and as a whole, its demand has fallen 6% in the first half of 2020. The report said the pandemic was the key influence on gold demand but it provided support to investments.
