PRITHVIRAJ KOTHARI

The gold market for the third week hits a positive momentum as the retail sales increases. The recent consumer demand data has been having an impact on gold prices in the domestic market. Bullion remains a safe haven asset for investors as the global uncertainties remain the same according to the status of the global market.

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The yellow metal has continued to make optimistic gains. India is considered to be the second-largest consumer of gold in the world with yearly consumer demand of approximately 800 to 900 tonnes. Due to the tradition and culture followed in India, the yellow metal has always been a symbol of eternal wealth and of the Goddess Lakshmi.

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Gold carries a high emotional value in the minds of millions of Indians as it is passed from generations to strengthen the family bond. This is a reason why the demand for gold in India can’t ever see a full stop. Amongst any metal, gold is the asset considered worthy by Indians.

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Gold prices in the market are experiencing an impactful boost following the line of retail sales data. The U.S. retail sales increased to 0.3 percent in January after a downwardly spiral in December. This has also been revised and gold prices increased at 0.2 percent according to the latest data stated by the U.S.A Commerce Department. The data has stated expectations for future stability in the prices of gold. However, several grouped sectors excluding autos, gas, building materials, and food services and feeds into gross domestic product calculations remained unchanged since January. It also rose by 0.1 percent. Economists were expecting to observe an increase of 0.3 percent.

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According to market analysts, the new highs in the gold market id due to the major improvement in two major currencies, which shows further signs of gold growing in investor’s appeal as it is a safe-haven asset. As such an asset that thrives in the midst of global uncertainties, gold's opportunity costs look attractive. In comparison to European and Japanese bonds, gold metal is certainly an attractive asset. The yellow metals marked against the two strong currencies have more to do with the structural issues in the euro and yen currency.

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Gold is not just strong against the US dollars, it also holds well despite the equity valuation of the US market. At the same time, the U.S. dollar has continued to trade at the top of its range against the yen currency. The rally that is observed in gold is a function of weakness in the other currencies.

 

Although the U.S. dollar has shown great strength so far in 2020, it has not affected the sentiments of bullion in the market. Gold also stands with critical support around $1,550 besides the U.S. dollar. It is considered to be a matter of time before gold asset revisits its peak to around $1,900 an ounce. This would also be guided by an extension of record highs in relation to the metal.

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Prithviraj Kothari is the author of this article. Find more information about Prithviraj Kothari.