Gold Extends Record Rally as Silver Tops $25 in Rush for Havens

Andrew Cummings
July 29, 2020

Silver Price: Domestic silver futures soared more than 7 per cent to settle at Rs 65,740 on Monday, in line with precious metal rates amid rising COVID-19 cases and worsening ties between the USA and China.

Multi Commodity Exchange (MCX) silver futures moved in a range of Rs 63,671-66,164 during Monday's trade, tracking gold prices which climbed to record highs.

Silver fell as investors weighed whether precious metals rose too high, too fast. This creates "a greater likelihood that at some time in the future, after economic activity has normalized, there will be incentives for central banks and governments to allow inflation to drift higher to reduce the accumulated debt burden", they said.

MSCI's ex-Japan Asia-Pacific index rose 1.3 percent as Taiwan's TSMC, Asia's third-largest company by market capitalisation, rose nearly 10 percent, adding to Friday's 12-percent surge.

The price of 24-carat gold stood at Rs 50,920 per 10 gram in New Delhi, while in Chennai, the price of 24-carat gold price in Chennai stood at Rs 53,490.

Escalating tensions between the USA and China, need for more stimulus measures, a weak United States dollar and rise in cases of coronavirus infections across the globe have kept demand for gold high.

The COVID-19 outbreak also continued to worsen, with more than 16.13 million people cases globally and 644,836 deaths, driving expectations of more stimulus globally to ease the economic blow.

On gold's near term outlook, Anuj Gupta, DVP- Commodities and Currencies Research, Angel Broking said,"Today, again we saw that gold has touched the lifetime high at Rs 51,833 levels and in the worldwide market, it touched the lifetime high to $1944.50 per ounce levels".

"Gold is temperamental too, but not almost like silver", said David Govett, head of precious metals trading at Marex Spectron, adding that the Fed meeting should calm markets. Geopolitical tension between US & China and weakness in dollar supports the bullions. US Bonds yields is also low which supports safe heaven demand for bullions. "Gold may test Rs 52500 levels and silver Rs 66,000 levels soon".

"Strong gains are inevitable as we enter a period much like the post-GFC environment, where gold prices soared to record levels as a result of copious amounts of Fed money being pumped into the financial system", with a weak dollar and negative real rates providing further impetus, said Gavin Wendt, senior resource analyst at MineLife Pty.

"Additionally, we expect investors to turn to gold as a means of hedging as we have seen in the first half of this year", it said.

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