Charted: Gold prices in India won’t fall any time soon

Shinning bright.
Shinning bright.
Image: REUTERS/Rupak De Chowdhuri
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Indian shoppers who plan to buy gold during the upcoming festive season may be in for a rude shock.

Prices of the yellow metal are unlikely to cool off any time soon as investors continue to remain jittery about the global economy amid the Covid-19 pandemic, and plow their money in gold, which is often considered a “safe haven.”

This trend has driven up prices of gold by nearly 20% over the last six months. In the first week of August, gold prices touched a lifetime high and currently hover around that level.

Despite soaring gold prices, more investors and savers are likely to flock to the yellow metal as India’s economy faces sharp contraction this year.

The trend is already visible globally as the inflows into gold ETFs (exchange-traded fund which invests in yellow) have risen sharply over the past six months. This will further push up the prices of gold in India and across the world.

The festive season is expected to be another driver for the prices of gold.

Hindus consider the festivals of Dhanteras (which falls on Nov. 13 this year) and Diwali (Nov. 14) auspicious for buying gold. Several shoppers hold off purchases for months to buy big-ticket items during this time.

Like each year, jewellers and companies in India are stocking up on gold in anticipation of this festive season demand. The import of gold into India rose by a whopping 107% month-on-month in August, according to Mumbai-based investment firm Edelweiss investor research. This reflects that demand is unlikely to cool off despite the pandemic, and high demand will likely push up prices.

Experts believe that the cheap availability of money due to record low interest rates coupled with the weakening of the dollar and the rising debt levels of Indian and other governments will continue to propel gold.

“The result will be currency debasement (devalution) and years of financial repression in order to service the debt. Gold, which is a stable form of money which promises to store value over long time periods,” said Chirag Mehta, senior fund manager-alternative investments, Quantum Mutual Fund, adding that hence it will become the preferred option for investors and savers to park their money.