Chennai/Mumbai: Buying or investing in Gold or Silver this week? Be prepared to be stunned by higher rates. Benchmark or prospective rates from several agencies for the yellow metal are on the higher side and so are rates quoted at Wednesday's auction at LBMA. The LBMA rates are at a high of 7 years.
For those unaware, the LBMA rates are factored in by major trade associations in their daily prospective rates. Furthermore, these rates are used by jewellers as a benchmark in quoting rates to customers.
Benchmark rates suggested by the London Bullion Market Association (LBMA) increased signficantly from $1575.05 per troy ounce on 13th Feb 2020 to $1604.20 (PM rates) on 19th Feb 2020. That is a near $30 per troy ounce jump within five days.
Here's a graph. LBMA does not publish rates for Saturday and Sunday, hence no rates on 15th & 16th Feb
LBMA Benchmark Rates for Thursday are yet to be publicized, but the momentum may have cooled for the day going by projections from leading jewellers associations such as the Madras Jewellers Association (MJDMA) and the 100 year old Indian Bullion Jewellers Association (IBJA) that factors LBMA rates. Meanwhile, rates across 22K and 24K (data tracked and monitored by Sify.com) set by jewellers witnessed a significant jump. This even as Indian Rupee remained range bound between 71.35 - 71.78 in the past week's trading session.
Rates across major Indian cities have peaked by at least 0.40 percent every day since Valentine's day.
A significant upward movement has also been recorded in spot rates. In international markets, Gold futures trading on the New York exchange traded to a peak of $1612.89 per troy ounce on Thursday while MCX Gold futures expiring April'20 recorded a peak of 41,798 and an average price of Rs 41,658.80 per unit.
The last reported highest benchmark rate in 2013 was recorded in April at $1597.75 per troy ounce. 2012 was a year full of volatility and saw benchmark Gold rate quoting the highest of $1791.75 per troy ounce during Oct'12. In India, the month of October 2012 saw extreme volatility with official 22k gold rates threatening to breach the barrier of Rs 3,000 per gram. Bullion was quoting an average rate of Rs 3,300 per gram back then while Silver was trading in a range of Rs 65-67 per gram. Silver rates have come down drastically with the benchmark rates themselves cooling.
The recent spurt in bullion rates will hit buyers investing in 22K, and 18K jewellery as well. For those looking out for alternatives, even Palladium and Platinum have turned expensive with data quoting Palladium rates at $2786 per ounce and Platinum at $1005. Each element has marked an average increment of at least 2 percent in the past four trading sessions.
Rates for Silver considered the poor man's Gold too has recorded a signficant jump. Silver rates monitored by Sify.com have increased from Rs 49.4 per gram on 14th Feb to Rs 52.1 per gram at the time of updating this story.
Here's a graph of price-movement on Silver:
Most financial analysts attribute the sudden sugar-rush to the Coronavirus impact with its epicenter in Wuhan. China's latest epidemic has managed to scare several organizations with fears looming large on managing supply-chain disruptions. For example, technology major Apple in a latest investor update said it may be unable to meet March revenue expectations considering a slower return to market from Covid-19 than normal conditions. Meanwhile, domestic companies back home have also complained of impact to sectors such as Smartphones, Automobile, and others. The impact is reportedly severe in sectors that have a larger dependency on China for raw materials.
With the Coronavirus becoming a large theme in several earnings releases, financial markets have started building their assets in safe-haven instruments such as metals like Gold, Silver, Platinum, Palladium etc. This should explain the sudden migration to Gold and Gold backed instruments. Gold is considered as a safe-haven for investors to avoid volatility risks in stocks and bonds.
With Gold rates peaking, most buyers, investors and enthusiasts investing in Gold are likely to question when the momentum could wane. And all eyes are upon Wuhan to understand if a cure is on cards. So far, Chinese authorities are yet to reveal of a cure, and hence buyers may have to wait for Gold rates to come down. For the record, the next up-coming special/auspicious day to buy Gold is Friday, March 6, 2020 (Guru Pushya Yoga). There is also Ugadi & Gudi-Padwa celebrations on 25th March 2020.