Gold is one of the most valued assets in the world. Given the importance of this yellow metal every economy keeps the same as a reserve against the currency they print in order to maintain the balance in their system. The gold prices remained stable for the better part of the last 10 years. However in the last 2 years the prices have seen a rise in volatility like never before. During the COVID times when the stock market crashed the gold metal came to rescue the investors and save them from heavy losses. This was the only savior as the crude oil prices went negative at once due to lack of storage facility. Hence gold is treated as one of the safest assets in the world and nothing can replace its significance.
Recently the gold prices went on a massive surge run. The prices went from 50000 to 56000 within no time. The jump of 6000 Rs. per 10 gram was due to multiple reasons kept together. The major ones among them were the depreciated U.S. dollar and COVID fears.
Gold Prices and U.S. Economy and U.S. Dollar
The U.S. dollar was down by a major amount recently. Also the dollar index represents that the valuation of the dollar has reached near the 52 week low of 94.63 and is currently trading at 103.21. Apart from this it is down to its 9 month low price. This price was last witnessed around May 2022. Due to the depreciation in the validation of the U.S. dollar the investors are shifting their money to invest into gold which is making its demand surge higher. This results in economics’ basic principle of higher demand, higher price.
Another reason attached to the gold pricing is the push it got from the Fed. The Fed eased its interest rate hiking spree and this made the gold prices get a huge boost from the investors. Also the easing inflation across the world is supporting people to demand more of the precious metal. However the major reason still stands out to be the huge depreciation faced by every currency across the world. And to safeguard their money investors have turned towards gold and silver in such currency depreciating times.
Gold Prices and COVID Crisis
If one remembers the last time gold was at an all time high price, it was during the market crash. The major reason behind the market crash was the COVID crisis and the lockdown imposed due to the same. Recently in China the cases of COVID have gone up to a huge spike. Many provinces across China are facing lockdown again to control the rising COVID cases. This has resulted into a fear among the world of another wave of COVID. Apart from this all the major countries have imposed strict restrictions on tourist travels and have also made it mandatory for RT/PCR tests for people visiting from that country.
All such steps lead to an impression in the investor’s mind that the markets are going to face another crash due to the rising cases. Currently the Indian markets are not performing well and the major reason behind the same is this rise in the COVID cases. The entire sentiment of the market has turned to fear and hence people are withdrawing their money from the stock market and investing the am into gold to safeguard it.
In such times when people are under panic they tend to move their money to a safe asset and that’s where gold comes into picture. Since the news of the Chinese lockdown the gold prices have suddenly seen a huge spike and the reason was a strong demand from people moving their money out from markets.
Current Scenario
The huge market fall in the Indian stock market recently is a clear indication of the investor’s sentiment. The Nifty50 which was trailing in the range of 18800 points came down to 18000 points within 4 days. It took 4 months for the market to come from 18000 to 18800 and above level and 9t just took 4 days to erase all those gains.
In the current scenario one has to be sure to not short any position against gold. The reason is there are analysts predicting the price of the yellow metal to go beyond 60000 Rs. If such a situation happens one has to make sure that every dip is a buying opportunity and every rise is not a shirting opportunity. In other words at every fall in the prices of gold one can buy the same to accumulate gold at a good low average price. Also on the other hand it is strictly advised to investors or trades to not short the same because if the COVID crisis increases or the currency position worsens the gold prices will shoot up like never before.
