A weaker rupee and a sharp rise in global rates pushed domestic gold prices to new highs today. On MCX, April gold futures jumped 2.5% or about ₹1,100 to ₹43,771 per 10 gram. Gold prices had surged about ₹1,800 per 10 gram in the past week.
Tracking gold, silver prices also moved higher today. Meanwhile, the rupee fell to 71.89 against the US dollar today, tracking weakness in other Asian currencies. A depreciation in the rupee increases the landed cost of gold in India as the country imports most of its bullion requirements. Domestic prices include 12.5% import duty and 3% GST. Silver futures on MCX rose 1.5% to ₹49,081 per kg.
In global markets, gold prices jumped over 2% today to their highest in over seven years as a spike in coronavirus cases outside China pushed investors towards bullion, which is considered a safe-haven in times of uncertainty. Spot gold rates rose to as much as $1,678.58 an ounce.
Jigar Trivedi, the research analyst at Anand Rathi Shares & Stock Brokers, said: “MCX gold has reached an uncharted territory since its trading at multi-year high in the international market. Coronavirus has continued to spread in Iran and South Korea. IMF has said virus outbreak could hit economic recovery sharply. Safe-haven demand has reached an all-time high again.”
South Korea, Italy, and Iran have reported a sharp spike in infections, although the total number of cases outside China remains relatively small. Among other precious metals, silver rose 0.9% to $18.62 an ounce while palladium inched up 0.2% $2,709.01 per ounce. Platinum eased 0.1% $972.70.
The increase in a number of new cases hit stock markets around across the world, with Asian equities sharply lower today.
The investment demand for gold has seen an uptick. According to data compiled by Bloomberg, holdings in gold-backed exchange-traded funds or gold ETFs climbed for 22 straight sessions through Thursday, the longest ever run.
Some analysts bet that gold could see more upside in the short term. Lower US yields and weaker equities could push gold prices further toward $1,750 an ounce even if the coronavirus is contained during the first quarter, say analysts of Goldman Sachs Group.
Already some analysts are betting that the US Federal Reserve may ease rates twice in the second half of the year as the virus threatens the global economy. Lower interest rates increase the appeal of non-interest yielding assets like gold.