The main reason to own gold is the sheer fact that it is an extremely good portfolio diversification tool, say market analysts.
Gold prices were steady at Rs 52,701 per 10 gram in the Mumbai market on subdued global cues and a weaker dollar. The yellow metal prices have witnessed sharp volatility in the last few days as market participants evaluate further direction after a sharp fall from recent highs.
The talks between the Democrats and the White House continue regarding the new coronavirus relief bill keeping the markets' hope high. US CPI was reported better than expectations in July, the inflation number increased by the most in 29-1/2 years amid broad gains in the costs of goods and services.
The rate of 10 gram 22-carat gold in Mumbai was Rs 48,274 plus 3 percent GST, while 24-carat 10 gram was Rs 52,701 plus GST. The 18-carat gold quoted at Rs 39,526 plus GST in the retail market.
“The main reason that we expect the gold price to go higher relates to the theories that dominate thinking within the halls of policy-making -- chiefly the theory that the economy can be made stronger via more monetary inflation, more credit expansion and more government spending,” said Chirag Mehta, Sr. Fund Manager- Alternative Investments- Quantum AMC.
While we are witnessing a correction and sideways consolidation in the short term, gold holds strong potential over the long term as fundamentals are stronger than ever.
“The main reason to own gold is the sheer fact that it is an extremely good portfolio diversification tool. It thereby helps you to reduce overall portfolio risk. These corrective phases are just the opportune time to build your gold allocations,” said Mehta.
Navneet Damani, Vice President, Motilal Oswal said, “Gold and silver witnessed wild swings after a steep fall from record highs in an earlier session, but managed to close above the key levels. US 10-year yields dipped from one-month highs, reducing the opportunity cost of holding non-interest bearing gold. Fed officials commented that the US economic recovery will be slow until the coronavirus is under control, and Americans will have to manage life with the virus for at least the next several months.”
Market participants today will keep an eye on the US weekly jobless claims data. The broader trend on COMEX could be in the range of $1910-1955 and on domestic front prices could hover in the range of Rs 51,700- 52,600.“COMEX gold December contract trades little changed near $1944/oz after a sharp recovery in yesterday’s session from a low of $1874.2/oz, the lowest level since July 22. Gold is still supported by a weak US dollar, rising US-China tensions and virus cases. The US
10-year treasury bond yields seem to have taken a pause after rising from the lows. Gold may consolidate after recovering from the lows with upper bound near $1960/oz and lower bound at $1915/oz,” said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.
The gold/silver ratio currently stands at 78.14 to 1, which means the amount of silver required to buy one ounce of gold.
Silver prices climbed Rs 1,690 to Rs 67,439 per kg from its closing on August 12.
In the futures market, gold rate touched an intraday high of Rs 52,365 and an intraday low of Rs 51,802 on the Multi-Commodity Exchange (MCX). For the October series, the yellow metal touched a low of Rs 45,596 and a high of Rs 56,191.
Gold futures for October delivery slipped Rs 119, or 0.23 percent, at Rs 52,135 per 10 gram in evening trade on a business turnover of 15,718 lots. The same for December delivery declined Rs 173, or 0.33 percent, at Rs 52,300 on a business turnover of 1,815 lots.
The value of the October and December contracts traded so far is Rs 3,474.53 crore and Rs 98.69 crore, respectively.
Similarly, Gold Mini contract for September edged lowered Rs 150, or 0.29 percent at Rs 52,355 on a business turnover of 10,238 lots.
MCX Gold has support at Rs 51,870-51,460 whereas resistance is at Rs 52,465-52,660, according to Motilal Oswal. The brokerage firm said sideways consolidation will be seen for the session.At 12:09 (GMT), spot gold was up $10.13 at $1,926.12 an ounce in London trading.