Global Market Replaces The Withering Dollar With Gold, Prices Hit Record High of $ 2,306 in Asian Trade Today

golden eggs

Global Gold Price Today (5th August 2020)

Gold prices in the Global market crossed the $2,000 per ounce mark on 5th August 2020. The blame is on weaker dollar and rising coronavirus infection cases internationally.

Spot gold hit a record high of $2,036 in Asian trade today. US dollar, which is also considered as the strongest currency, fell against other major currencies of the world, fuelling the upsurge in gold. Spot gold prices have swelled over 33% this year in the duration of couple months.

Gold Prices Today in India- (5th August 2020)

gold rates today

Gold prices in India has moved closer to Rs. 55,000 per 10-gram on Wednesday tracking positive trend for this precious metal in the National and International markets.

Gold stocks were up 0.57% or Rs. 311 to trade at Rs 54,862 per 10-gram as of morning of 5th August 2020 (10:40 am). It touched a high of Rs 54,910 during the day.

Indian spot Silver price on Aug 05, 2020.

Silver price on the other hand crossed Rs. 70,000 per kg mark today. Silver stocks in the month of August dealt at Rs 69,950 after touching a high of Rs. 70,223 in one day.

On July 28,2020 The Indian Wire reported the Gold and Silver market rates along with analysis of the investment market which painted a radically dissimilar picture.

 

gold rates over past ten days

Currency Exchange Rate on Aug 05, 2020.

The dollar to rupee conversion today improved to Rs. 75.0 as compared to previous close of Rs. 75.1. The fall of dollar against rupee might influence gold’s rate today reflecting a lower gold price in the domestic markets as deciphered by the Economists at the HT analytics.

The dollar index today fell 0.3% against its rivals, making gold less expensive for holders of other currencies.

US Government holds maximum gold, followed by ETF holders in the second position.

US gold reserves exceed 8,000 tons. Worldwide holdings in gold ETFs rose to 3,365.6 tons on Monday, up 30.5% this year, according to preliminary data compiled by the website Bloomberg. That’s a couple of tons ahead of Germany’s Gold reserves.

Central banks around the world have rolled out a spell of inducement measures and cut interest rates to moderate the economic damage caused by the pandemic, supporting gold’s rise. Gold is seen as a hedge against inflation and fears of currency’s value degradation.

The difference between domestic gold prices and international price arise because of custom duty and GST applicable in different countries at different tariff rates.

Why gold prices are rising despite frail demand for jewellery?

Gold jwellery shop
A staff member wearing a face mask arranges jewellery at a gold shop in Hanoi on July 29, 2020. (Photo by Nhac NGUYEN / AFP) (Photo by NHAC NGUYEN/AFP via Getty Images)

Demand in India, one of the world’s biggest buyer of gold bars, coins and jewellery, plunged after the coronavirus stalled imports and emptied malls/shops. Sales have been slowed to return as rising prices deter buyers.

Trade flows have also been affected. In India, which imports almost all the gold it consumes, imports dropped by about 99% in April and May.

However, total holdings of physical gold in ETFs have risen by more than 600 tons this year, according to data compiled by Bloomberg website, and ETF inflows surpassed retail purchases in India in the first quarter for the first time since 2009. ETF buying increased during the three months to June.

It’s not the first time investment demand for gold has surged during a period of global uncertainty and boosting prices has discouraged Asian shoppers. Yet it’s unclear what role coronavirus may play in influencing the future prices.

Definitely this year, the retail business will be quite challenging, especially for the jewellery sector.

What is a GOLD Exchange Traded Fund (ETF) in simple terms?

Buying Gold ETFs means you are purchasing gold in an electronic form. You can buy and sell gold ETFs just as you would trade in stocks. When you actually redeem Gold ETF, you don’t get physical gold, but receive the cash equivalent. Trading of gold ETFs takes place through a dematerialised account (DEMAT A/C) and a broker, which makes it an extremely convenient way of electronically investing in gold. GOLD ETF

In short, Gold ETFs are units representing physical gold which may be in paper or dematerialised form. One Gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity. Gold ETFs combine the flexibility of stock investment and the simplicity of gold investments.

Gold ETFs are listed and traded on the National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd. (BSE). Gold ETFs trade on the cash segment of BSE & NSE, like any other company stock, and can be bought and sold continuously at market prices.

Why are investors investing in Gold ETFs?

Gold ETFs are ideal for investors who wish to invest in gold but do not want to invest in physical gold due to the storage hassles / doubt about purity of gold and are also looking to get tax benefits. There is no premium or making charge, so investors stand to save money if their investment is substantial. What’s more, one can purchase as low as one unit (which is 1 gram).

Because of its direct gold pricing, there is a complete transparency on the holdings of a Gold ETF. Further due to its unique structure, the ETFs have much lower expenses as compared to physical gold investments.

What is causing the rise of Gold prices beyond reality?

1. The Dollar-Rupee comparison:

The rupee-dollar equation has a role to play in Indian gold rates although it does not impact global gold prices.

Gold is largely imported in India and hence if the rupee weakens against the dollar, gold prices will likely go up in price in rupee terms. So, a deprecating rupee may dent the demand of gold in the country.

2. Protection against Future uncertainty:

People want to invest or buy gold to protect themselves from unpredictability and uncertainty. Indian households view gold as a safe anchorage, an asset to buy when other assets are losing value. Underlining gold’s attraction as an investment for good times and bad, most investors would buy gold whether the domestic economy was at a boom or is in stagnation.

3. Inflation in relationship with Gold:

When inflation rises, the value of currency goes down and therefore people tend to hold money in the form of gold. In times when inflation remains high over a longer period, gold becomes a tool to verge against inflationary conditions. This pushes gold prices higher in the inflationary period.

4. Global tension in International politics:

Gold usually does well during international politics disorder and the current crisis over the Coronavirus pandemic has boosted the prospects of these precious metal. Crises such as wars, which have a negative impact on prices of most asset, have a positive impact on gold and silver prices since the demand for gold and silver goes up as a safe shelter for parking funds and investments.

5. The fall of the mighty DOLLAR:

Under normal circumstances, gold and dollar share an inverse relationship. Since international gold is dollar denominated, any weakness in the dollar pushes up gold prices and vice versa. The inverse relationship in terms- a falling dollar increases the value of currencies of other countries. This increases the demand for commodities like silver and gold. Increase in demand means increase in prices. When the US dollar starts to lose its value, investors look for alternative investment sources to store value and gold is an alternative for those investors.

6. Future Demand for Gold:

Global demand for gold is 1,000 tonnes more than the supply according to research. With no new mining capacity coming through amid the world under severe lockdown and depletion of resources, most of the gold is being recycled and smuggled. Therefore, decrease in Supply in the market is another factor for changes in gold rates. Inflationary pressures in the world economy are positive drivers of gold prices.

Current series of Sovereign gold bond 2020-21:

Sovereign-Gold-Bond-cash-sm

The Series-V of the sovereign gold bond (SGB) scheme 2020-21 opened for subscription on 3rd August 2020. The issue came at a time when gold prices are trading at highest prices breaking records. The issue closes on Friday, August 7. The certificate of the bond will be issued on August 11.

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold like ETFs. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The bonds are issued by Reserve Bank of India on behalf of the Government of India.

There are mixed reviews and analysis by the investor experts and market analysts. Some say that investors should wait for the next phase which will be held in the month of August considering the unfavourable prices at the moment. While some say that the prices might rise even higher as compared to what they stand at now on 5th August,2020. If investors want to invest then it should be purely based on their self interest and taken after personal calculative risk analysis.

 

 

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