Friday, Nov 2
By Roshni Devi and Shrea Paul
MUMBAI – An unpredictable global economy due to increasing international tensions, and improving investment demand are likely to keep domestic prices of gold in the green for the fourth straight month, traders and analysts said.
Central banks bought 148.4 tn of gold in Jun-Sep, up 22% on year and the highest net purchases since 2015, to diversify their reserves away from the US dollar, the World Gold Council recently said.
Gold holdings with SPDR Gold Trust rose by 13.89 tn in October to 754.06 tn, data on the website of the world’s largest gold exchange-traded fund showed. A rise in assets is a sign of improving investor sentiment for the yellow metal.
Gold is regarded as a safe haven asset, especially in times of trouble in financial markets.
Growing fear of a economic slowdown amd intensifying trade spat between the US and China had battered global financial markets last month.
“Gold prices are getting support from geopolitical tensions such as US-China trade war, Iran oil sanctions, killing of a Saudi journalist, Brexit and the European Commission’s stand on Italy’s budget fiasco,” said Abhishek Bansal, chairman of ABans Group of Cos. “However, gold is finding some pressure also due to rising US bond yields and a rally in the US dollar index.”
Gold futures on domestic bourses are seen moving in a range of 31,500-32,500 rupees per 10 gm in November, while on COMEX, prices are seen between $1,200 and $1,260 an ounce, as per a dozen traders and analysts polled by Cogencis.
At 1509 IST, the December gold contract on Multi Commodity Exchange of India was at 31,680 rupees per 10 gm, and the same-month gold contract on COMEX was at $1,237 an ounce.
In October, gold contracts on the Multi-Commodity Exchange of India rose nearly 4% backed by the rupee’s fall to a record low of 74.4825 a dollar. On COMEX, gold contracts rose more than 2% last month.
Speculative net long positions in futures contracts of gold on COMEX rose in the week ended Tuesday, after having been in the bearish territory for the previous nine weeks, which is also seen as a positive for the metal.
High gold prices and delayed crop harvest weighed on demand for gold in India. Buying during Dussehra, an auspicious period for Hindus to buy gold, in October was low.
Despite demand for gold in India, the world’s second largest consumer, is seen picking up marginally for Dhanteras and Diwali next week, jewellers are pessimistic.
“Demand around Diwali is not even 30% of last year and its on the decline. The best we can hope for is token purchases,” said Haresh Acharya, director of Parker Bullion.
Hope of the rupee appreciating have also dried up and the currency’s fall is expected to lift domestic prices of the yellow metal.
Since April, the rupee has depreciated more than 22% and has fuelled concerns that the currency may weaken going ahead.
Following are the expectations of respondents to the Cogencis poll:
(rupees per 10 gm)
($ per ounce)
ABans Group of Companies
Aditya Birla Money
Monarch Networth Capital
National India Bullion Refinery
US$1 = 72.5350 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Ramya J.S. D’Rozario
Cogencis Tel +91 (22) 6619-0000
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