Why the gold rates are increasing rapidly during Covid-19 lockdown

Often heard from our ancestors, “Gold is the real wealth.” The current scenario and sky-high price of Gold have ones again proved it. Though physical buying has been suspended in the domestic market, still Gold price is increasing rapidly. The spot market has come to a saturation point. In contrast, the digital trading of Gold and Silver is tremendously going on in the future market. The current rate of Gold is Rs. 44,760 and it is increasing rapidly. As per a recent report, in 2020, gold price may cross Rs. 53,000. There are many factors at the moment that is emphasizing this belief. Let’s know how these factors are going to affect ordinary people as well as the traders and investors.

In this scenario, a significant question has arisen that will the Gold price hike be profitable for common people or the traders? To understand the facts and figures, we need to know why the price of Gold is rising tremendously, irrespective of a massive crisis in the market where the whole World is facing a tremendous economic slowdown.

Amidst Corona Crisis Who All Are Still Buying Gold And Why?

People invest in buying a Gold bond, Gold ETF, and even trades in the form of multi-commodity exchange. The Central banks of every country invest in Gold. Recently Bank of America has predicted that the rate of Gold can reach a height of 3000 dollars per ounce. This predicts that if you have enough Gold in the preserve, then you will always be benefitted as of when there will be inflation.

Currently, the Federal Reserve System (Fed) and all the Central Banks are printing more currencies so that there may not be any shortfall of liquidity in the system. And one thing more to keep in mind that FED can print currencies, but SINCE Gold is limited, so in that case where there will be the demand for money, the Gold rate will increase. To diversify their investments, Central Banks are even investing in Gold.

Status of Gold Purchase and Sell in Last Financial Year

Even if we look at the last financial year, there has been a massive inflow in Gold ETF after long six years, which is again a remarkable rise in Gold demand. And specifically, if we talk about the price of Gold in India three significant reasons are there-

  • First reason is the sudden increase in dollar rate as compared to rupees
  • Second reason is the 12.5 % of import duty that is imposed on Gold
  • Third reason is the GST that you paid while buying Gold
  • So, the overall 15 % tax is creating a massive price hike in Gold, especially in India.

Recently, in Thailand, as soon as there was an ease in lockdown, people were found in a long queue to sell their Gold for liquid cash. Even the Prime Minister of Thailand has requested to gradually sell their Gold so that the shopkeepers may not run out of money.

India can also face such issues due to the economic slowdown and job recession due to the Corona crisis. It is assumed that as soon as lockdown gets over, people can come out to sell their preserved Gold. Even in the last quarter there was heavy downfall of 41 % in gold sell. Only 79 tons of Gold has been sold in the market. Moreover, last year, 119 tons of Gold has come out from house to market.  And there is a prediction from World Gold Council that after lockdown, stored household gold of more than 119 tons can come out in the market. People may start selling their Gold for liquid cash. Currently, Gold is the only profitable investment method and is the most accessible selling item too. So, people can sell it anytime, anywhere, as of when required to get liquid cash in the time crisis.

Actually, Vinay is a writer by chance and writing is one of his passion. He love to pen down his thoughts in the form of blogs/articles & forums. He is a poet too :) Despite having a tough life, he is also passionate about the social relationship and he loves to interact with the new crowd across the globe.

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