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In August 2020, when the first wave of Covid-19 was slowly receding, the price of gold rose to record highs of more than Rs 56,000 per 10 grams only to go down in the later months.

At the onset of the second wave of infection, Indian equity markets rose to record highs and inflows to mutual funds also zoomed. However, at the same time the price of gold is again back to around Rs 50,000/10gm.

For the past couple of days the price of gold has been hovering between Rs 49,000 and Rs 50,000. But experts feel that the price of the yellow metal would again race towards Rs 56,000-Rs 58,000 once the Covis restrictions get over.

However, some other experts feel price would go down further as the price of gold in international market would also decline.

Investment in gold

Since early days gold was considered one of the best options to park one’s money. The liquidity and the price movement make this avenue a lucrative one.

But nowadays, there are multiple avenues before a person to invest in gold. Gold bond, gold ETF, gold MF, digital gold, etc, are the options.

Yet physical gold holds an emotional attachment for Indians.

Might go down

The price of gold would go down further as the sentiment in international market is not so positive, said Arindam Saha, MD, Vista Intelligence and former eastern zonal head of MCX.

“In USA, the inflation trend is upward right now and US Federal Reserve may go for a rate hike. Once the rate hike happens then the gold price would fall as the gold price is inversely proportional to the interest rate,” explained Saha.

Besides, he also pointed out that India’s exports are growing day by day and forex reserves are also growing that has a negative impact on gold price. All these may put a downward pressure on the price of the yellow metal which might decline in 4-6 months.

Saha also added that more and more people are investing in equity market as well as in mutual funds. It proves that the demand of gold is decreasing among the retail investors. This will also have a negative effect on gold price.

Big retailers

Unlike Saha, big retailers in Kolkata are betting on a rise in prices.

“The price already close to Rs 50,000/10 gms level and it would further go up by another Rs 6,000-Rs 7,000 within a period of 4-5 months, according to retailers.

“The situation is not conducive right now as corona related restrictions are in place throughout India and a couple of states are unlocking in a staggered manner. We hope that within another 15 days, the situation would inch close to normalcy. We can feel that once the market becomes normal, the price would rise further, and would go up to Rs 56,000-Rs 58,000 range per 10 gms,” said Bablu Dey, secretary, Swarno Silpo Bachao Committee (SSBC) told Money9.

“I am sure the retail price would go up once the restrictions ease. Last year too during the unlock period gold price peaked in August 2020. This year we would witness the same trend,” said an owner of a popular jewellery retail chain in eastern India.

“The price of gold depends on a number of issues and we think that all these factors would add up to push prices towards the roof,” Dey added.

Trends

The first wave of Covid-19 pandemic led to sloppy demand of gold jewellery in India for calendar year 2020. It dipped by 42% to 316 tonnes as compared to 544.6 tonnes in 2019, World Gold Council (WGC) report shows.

 Along with pandemic effect record price hike of gold is another important issue, said the WGC report.

The value of jewellery demand was Rs 1,33,260 crore, down by 22% from Rs 1,71,790 crore in 2019. The total gold (jewelley and investment both) demand for full-year 2020 was 446.4 tonnes compared to 690.4 tonnes in the previous year.

Total investment demand for 2020 was down by 11% at 130.5 tonnes in comparison with 145.8 tonnes in 2019, according to WGC. In value terms, gold investment demand was Rs 55,020 crore, up by 20% from Rs 45,980 crore in 2019.