The direct impact of this action is on the prices of these metals which will shoot up on aggressive buying. Due to the weak investment sentiment and trade war escalation, gold has become a safe haven
In recent times, there has been a significant rise in the prices of bullions. Gold and silver prices have been on a rise since August 1 in a consistent manner. The current increase, in the prices of these metals, is a record increase of past two years; and such a strong sentiment was witnessed last time in 2017.
This hike in prices has made these metals less popular among the local buyers. Customers have either postponed buying gold jewellery or have limited it to exchanging their old jewellery for new. The Indian government had raised the import duty of gold from 10 percent to 12.5 percent in the recently announced budget, which further shook the spirit of gold buyers.
The increasing trend in gold prices has prompted customers to sell old jewellery purchased at lower costs to earn profit resulting in a limited purchase of fresh stock by jewellers. Fresh purchases by customers have dipped 30-40 percent.
Supply of scrap gold has increased in the local market and is likely to jump further in the coming days with the rising gold prices. According to the jewellers, old traditional heavyweight jewellery is mostly coming in for sale in the market.
However, the current situations have brought a boost for investors who are planning to invest in these precious metals.
President Trump in his recent announcement indicated that he would be imposing penal import duties on Chinese imports to the US, which brought the stock markets tumbling down, resulting in the investors choosing gold and silver to trust with their funds as a safe haven. This action can be referred to as ‘asset safety’ - where the investors believe that their funds are safely locked up in these precious metals than in the volatile stocks and shares.
The direct impact of this action is on the prices of these metals which will shoot up on aggressive buying. Due to the weak investment sentiment and trade war escalation, gold has become a safe haven.
The impact of this has been witnessed in silver prices as well. A strong overseas trend has led to an increase in silver prices. Market analysts are of the opinion that rise in silver prices to fresh positions is a stepping-stone to create an uptick in its demand in the spot market.
With the expected increase in the supply of gold, dealers will buy less in the coming months. In line with this, dealers have paused purchasing these precious metals while investments in these metals are touching new heights.
The author is Head of Research at CapitalVia Global Research Limited – Investment Advisor.Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.