Gold prices today have risen to their highest in 9 years crossing the Rs. 50,000 mark. Gold has been a safe-haven asset for centuries. Whenever there is uncertainty or volatility in the market people tend to invest in more in Gold than any other asset. Along with Gold other precious metals like Platinum and Sliver saw an increase in respective prices. US gold futures rose 0.4 per cent to $1,823.80. Moreover, Holdings of SPDR Gold Trust(Largest Gold ETF in the world) rose 0.4% to 1,211.86 tonnes on Monday.

What is the cause for the surge in Gold prices?

  • The INR against the USD currency has depreciated by 7% since September 2019, this has pushed the gold prices higher especially in the Indian market
  • The RBI has cut its policy rates by almost 75% aiming to inject liquidity in the economy. Any rise in the amount of liquid currency in the system pushes the Gold price higher.
  • Additionally, The US equity markets fell by almost 40% which forced the US Fed to announce a record amount of liquidity injection and bond-buying programme of more than $3 trillion.
  • The rising number of Coronavirus cases and uncertainty about the vaccine has caused investors to invest in safe-haven assets like Gold.
  • Countries around the world have announced policy rate cuts and stimulus packages which could give rise to inflation and therefore pump Gold prices.

According to Financial Express, Global gold-backed ETFs and similar products added 298 tonnes, or net inflows of $23 billion, across all regions in the first quarter of 2020—the highest quarterly amount ever in absolute US dollar terms and the largest tonnage additions since 2016, as per the WGC.

Gold will continue to play its role as an eminent portfolio diversifier and a store of value during economic uncertainty it would be best to invest in it strategically. For now its best to keep a keen eye on policy changes, rate cuts or sale of reserves by major central banks to track Gold prices.

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