International wealth management firms and bullion dealers said that rangebound trading in the gold and silver markets persists, which suggests that safe haven seekers are not concerned. In fact, holdings of physically backed gold and silver products have not recorded any inflows for the past few weeks as economic activities have piçked up in most parts of the world despite rising cases of Delta variant.
“Rangebound trading in the gold and silver markets persists, which suggests that safe haven seekers are not concerned by the rapid spreading of the Covid-19 Delta variant. We share this view and instead believe that the markets’ focus has turned to the outlook for US monetary policy, with shifting expectations about interest-rate hikes causing short-term swings in prices. In the medium to longer term, the economic outlook matters the most, calling for a further fading of safe haven demand and leading prices somewhat lower,” Carsten Menke, head, next generation research, Julius Baer, said.
Despite some regional hiccups, a broad-based economic impact of the Delta variant seems very unlikely, in our view. Consequently, the demand for gold and silver from safe haven seekers is unlikely to pick up again in the short term. The markets seem to have entered an environment similar to that of 2013, 2014 and 2015. Back then, short-term price swings were primarily driven by shifts in the market mood, which brightened and darkened based on the signals that the US Federal Reserve was sending about its monetary policy, Menke added.
Gold prices shot up to Rs 57,000 per 10 gm last August, when the first wave of covid was at its peak. From that level, gold prices have corrected and on Tuesday it was trading Rs 47,846 per 10 gm – a drop of 16.05 per cent in a span of 11 months.
Harshad Ajmera, owner of bullion outfit, JJ Gold said “Compared to last year covid period, physical demand of gold in the form of coins and bars have come down by 40-50 per cent. However, we feel that it is a short-lived phenomenon.”
Ajmera said people are now investing in gold through exchange traded funds and sovereign gold bonds to avoid the hassle of keeping physical gold. In June, the gold ETFs received a net inflow of Rs 359.66 crore, higher than Rs 287.86 crore in May.
