Gold has always been a safe haven for investments, even amidst global economic crises. This is especially the case in Indian culture, where we invest in gold as ritual practice in festival and marriage seasons. Gold, along with its digital instruments, has generally maintained a less volatile nature even as other asset classes and equities are reacting to global news, however, this has not been the case during the COVID-19 pandemic. So is it a good time to invest in gold?
As the pandemic began and the lockdown was enforced in March, gold prices plummeted globally, plunging below $1,500/troy ounce globally and Rs. 38,000/10 grams in India. It made a swift and sure recovery in the week to follow, but this left even Arvind Sahay, Chairperson of India Gold Policy Centre, confuse. “In other times of crisis, gold was looked at as a safe haven”, he claimed, but went on to add, “that doesn’t seem to be the case this time around because of the real suddenness in the fall in asset prices”.
However, this is no reason to be afraid of investing in gold. In fact, historical trends support the early dip in gold prices as the global economy takes a hit. In late 2008, just as the world was rocked by a global recession, gold prices plunged heavily from over $850/ounce to under $700/ounce. Since then, prices made a skyrocketing recovery and volleyed back up to over $900/ounce in a matter of two months! Gold subsequently went on to make a multi-year rally all the way into 2011, justifying positive sentiment in the long-term prospects of gold.
Gold prices have been surging, mirroring the trend from the 2008 rally. Domestic gold prices have hit a high of Rs. 51,000, as futures markets have also reflected this price point. To add to the case of the yellow metal, US-China tensions have pushed many to shift money from USD, an otherwise sound safeguard in such times, into gold. Even as prices continue to surge, many analysts have maintained their bullish stance on precious metals.
One definitive reason as to why analysts are confident in prices rising further are the unprecedented stimulus packages governments are providing around the globe. US, Japan, and even the EU have pumped collective trillions into the economy, suggesting “gold and silver prices are further expected to reach newer highs in medium to long term”, according to Jimeet Modi, founder and CEO of the Samco Group.
As experts continue to hold the opinion that gold prices will rise this year, it is but natural that you want to get in on the gains. Some believe gold will hit Rs. 65,000 by the end of the year! According to Somasundaram PR, MD India, World Gold Council (WGC), domestic demand is currently low due to COVID and the record high prices, but he predicts “demand to pick up sharply around Diwali when we expect normalcy to return in a certain way”.