Paytm IPO
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13 May, 2022
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As the Ukraine-Russia war continues to wage and enters its 7th week, the price of precious metals has witnessed a surge. In particular, gold and silver– metals that are viewed as a safe haven – have seen their prices rise considerably
The Multi Commodity Exchange of India Limited (or MCX) saw the price of gold futures surge by 1.5 per cent which is indicative of an INR 800 per cent rise such that the price of 10 grams of gold now amounts to INR 51,020. When considering silver futures, the rise amounted to close to 2 per cent which equates to about an INR 1,217 surge such that a kilogram of silver now costs INR 66,120.
As per the understanding of market experts, outflows from the equity market given the inflation concerns across the globe interspersed with the fear of a wider war have made bullion hold a greater appeal which in turn has elevated the price of gold further.
The global economy had already been experiencing decades-worth of inflationary concerns and Russia’s invasion of Ukraine has further compounded these issues as the commodities basket as a whole has taken a massive hit.
Stagnation within the equity markets has essentially triggered traders to rush toward gold. If the spot prices of gold are to be considered, they acquired new heights reaching INR 52,500 which is a nine-month high on the last day of February this year. The month itself saw the prices of gold rally right up to INR 4,750 for 10 grams.
In the same vein, spot prices of silver reached a level of INR 68,150 on the last day of February prior to settling at a level of INR 65,174. As per data available silver has risen by up to INR 7,250 per kilogram.
Gold itself rose by more than 6 per cent in the month of April and lurked close to the peak it acquired in September 2020. Market analysts feel that this trend will continue to exist in the near future and feel that the demand for gold is set to rise.
Certain analysts feel that oil serves as one of the primary contributors to the inflationary figures. If one were to look at the personal consumption expenditures price index, they would note that it rose by 6.1 per cent from the previous year. This is the highest it’s ever risen since 1982. Another factor as to why commodity prices may continue to be high is supply risks.
The primary reason gold is currently gaining value is due to the fact that it is often used as a hedge to protect oneself against inflation and to protect one’s wealth in instances of political as well as financial uncertainty.
Short sellers’ must wait for the opportunity to present itself prior to making moves and should ideally wait until the geopolitical worries die down. That being said, analysts do recommend that gold and silver be amassed over a period of time and should be purchased during the time their prices dip. Investors must also note that there exists no specific way to time the gold and silver market price.
A large number of market experts are of the opinion that gold is currently trading at the buy zone and will continue to operate within this realm so long as uncertainty reigns supreme and the equity market continues to be awry.
While traders will be able to find opportunities on either side, the bias is primarily bullish owing to which short positions should ideally only be maintained on an intraday basis. Now that you know why the gold price is increasing, you may want to consider investing your money in gold-backed exchange-traded funds. While gold-backed ETFs have been around for over a decade in the Indian market, they have yet to capture the country’s attention in a big way given that the Indian gold ETF AUM amounts to under USD 1 billion. This falls in contrast to the Spider Gold ETF which serves as the world’s largest gold ETF and which has assets under management that exceed USD 35 billion. To have questions like “will gold price increase” answered, visit the Angel One website today.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.
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