Investors move to gold as geopolitical tensions rise

Investors move to gold as geopolitical tensions rise

The escalating conflict between Israel and Gaza and positive jobs data in US led to gold prices rising to its highest this month. Positive commentary by the US Federal Reserve also helped, said experts.

Gold International rates gained 2.65% since October 6, last Friday, to $1,881.62 per ounce, its highest this month. Meanwhile MCX spot gold rates also climbed to its highest in October at Rs 57,859 per 10 grams, logging in a growth of 2.7% since Friday.

“Gold moved up primarily because of US jobs data last week. US employers added more employees than what the market was expecting,” Debajit Saha, lead analyst- Metals Research at London Stock Exchange Group, said.

Naveen Mathur, Director of Commodities and Currencies at GIFT City IFSC, considers the geopolitical conflict as one of the primary reasons for the gold prices to shoot up but he says that prices in India are also impacted by the depreciating rupee.

However, most believe that the rise might be temporary. Mathur anticipates that the dollar rate will not go much above $1,900 in the long term. Even Saha believes the same. “It will be contained between $1800-1900 level, given nothing unusual happens in the market,” he said, while not expecting a “big push” in the market.

Chirag Mehta, Chief Investment Officer at Quantum AMC said, despite some near-term volatility, the outlook for gold in the medium-to-long term perspective looks promising. The downside looks very limited, Mehta said, adding that international gold rates have corrected a “good amount” of 10% from its earlier levels of $2,000 per ounce.

At the same time, silver international rates gained about 2.78% and MCX spot silver rose 4.13% since October 6. However, MCX spot silver continues to lag, and inflact, declined 2.49% in October. This is probably because the silver is more volatile than gold and haven’t been able to catch up with rising gold rates, said Mehta. Moreover, he added that people are worried about a potential slowdown as well, if slowdown takes hold and rate are higher then probably silver does not become an attractive investment.

Silver, apart from its usage in jewellery and silverware, has its place in the industrial uses as well. “About 60% of the use of silver around the world is moved towards industrial metals than anything else,” said Mathur. So geopolitical tensions, China factor, etc impacting Indian economy could hence dampen the demand for silver. “MCX spot silver rates falling down 2.4% in October is nothing unusual. When demand is less and local supply increases, the market goes in to discount. It is common phenomena,” said Saha.