In what may appear as a soothing news for prospective Gold and Silver buyers, rates for several precious metals have cooled by a wide margin in the past two trading sessions.
Gold rates which swung up by as much as 6 percentage and Silver which peaked to levels of Rs 53 per gram have certainly cooled down.
On Wednesday, latest updated rates on Sify.com showed the relief was in a range of Rs 1,000 - Rs 1,300 for ten grams of 22 Karat Gold in the last two trading sessions. Although a look at prices suggests a cooling, the volatility is still present with several reports of profit-booking made by bullion traders.
Rates have swung in the last month in a range of 5-6 percent. In the month of February, lowest rates in Chennai, for instance, were reported at Rs 38,380 on Feb'6. On Wednesday, the lowest average price retailers quoted was Rs 40,610 for 22 Karat (916) Gold. The difference between the high and the low in the last one month stands at 5.15 percent. For Bullion, the change in the last 30 days stands at 5.67 percent.
THE BAD NEWS:
For retail investors and bullion enthusiasts, the bad news however is that the bomb on Gold, Silver and other precious metals is yet to be completely defused.
There is extreme volatility and trading charts suggests Gold rates could head further north. India, the world's second biggest consumer could observe demand peaking up in March during festivities of Ugadi and Gudi Padwa (25th March 2020). Current marriage season that ends in a week will resume in June-Sept'20 and higher rates may be observed during April owing to demand from prospective brides and grooms.
On the longer term of 12 to 15 months, brokerage firm Motilal Oswal has suggested that Gold could surpass Rs 47,000 per ten grams mark.
In a note, the brokerage firm said, "We continue to maintain our positive bias on gold, targeting the level of Rs 44,700 followed by Rs 47,000 maintaining support at Rs 40,300 followed by Rs 39,100 over the next 12 to 15 months."
It also added, "In the last couple of sessions, we have witnessed a sharp rally in gold prices as until now there is no breakthrough of an antidote for the virus and at the same time, stimulus announcements by the PBoC is suggesting that outbreak of virus could derail the pace of Chinese economy."
Also, the spike a few days ago was attributed to heightened investor sentiment in the wake of the deadly Coronavirus epidemic. In China, the epicentre of the outbreak, coronavirus related deaths increased to 2,663. The deadly virus has infected more than 77,658 people in China and was described by President Xi Jinping as the "largest public health emergency since the founding of the country."
Cases in Italy, South Korea and in Iran had risen sharply. The European Union (EU) has announced a new aid package worth 232 million euros ($252 million) to boost global preparedness, prevention and containment of the fast-spreading coronavirus.
Besides Coronavirus, a tepid Chinese economy is expected to result into a major drop for several key sectors. Nilesh Shetty, Fund Manager for Equity with Quantum Mutual Fund explains that the initial assessment pointed towards an impact on several Indian sectors having import-led linkages with China. He also compared the Cornavirus impact with that of SARS and concluded that these were transitory in nature.
In Jan'20, tensions over Iran stoked the markets the wrong way. The trade war uncertainty between US-China had appeared to have just waned that a newer challenge has engulfed markets.
Here is a quick video to understand the Coronavirus connection:
Disclaimer: Information presented above is only for information purposes. Readers are advised to seek professional advice when it comes to investments in commodities and equities. Do take a look at our city-wise gold rate pages to understand market trends prior to investing in Gold/Silver.