Money Talks

October 23rd 2020


The India has experienced an increase of 0.14% in spot gold price on 21st Oct / Wednesday, taking the value to Rs 52,889 from Rs 52,810. It was also higher than the previous week average of Rs 52,520 by 0.69%, whereas global spot prices saw a downturn of $3 to $1,919.3 value on 22nd Oct, 2020. change was seen in MCX future price as of 22nd Oct, 2020, and had a value of Rs 52,889.

In Delhi, the price of 22-carat gold has hiked by Rs 132 to Rs 46,919 per 10 grams and that of 24 carat gold is at Rs 51,366 with a hike of Rs 144.

Gold tends to increase when people prefer investing in gold due to the inflation and concerned about the risks in the financial system. The Investors to get out of risk are putting the money on gold despite the rate of interest is more on deposits. On the other hand, at times gold rates also decrease due to the fact that the fall in international markets increase in dollar value and other tensions between the countries. Off late the gold prices have coming down due to the US China dispute.

U.S. Yields

The slide in U.S. real yields into negative territory has been a key driver of gold’s rally, with the metal becoming attractive relative to bonds.

But a recovery in yields since late last week helped sour the sentiment in gold, especially with some indicators showing the metal trading at overbought levels.

Gold ETFs surpass 1,000 tons of new demand in 2020

Gold-backed ETFs and similar products (gold ETFs) recorded their tenth consecutive month of net inflows during September, 2020, matching equivalent stretches in 2008 and 2016.

Gold ETF holdings increased by 68.1 tons (t) (US$4.6bn) or 2.0% of assets under management (AUM) despite gold’s worst monthly price performance since November 2016. Global net inflows of 1,003t (US$55.7bn) in 2020 have led overall gold investment demand and taken the gold ETF holdings universe to a fresh new all-time high of 3,880t and US$235bn in AUM.

London Gold Market

Measured by trading volume, the London Gold Market is the world’s largest wholesale gold market, and in conjunction with the US Gold market, is one of the two gold markets that dominates worldwide gold price discovery. Although trading volumes of the London and New York gold markets are both higher than trading volumes in the China Gold Market, the Shanghai Gold Exchange generates the world’s highest physical gold trading volume.

Participants in London’s gold market comprise investment banks (colloquially known as bullion banks), brokers, commodity trading companies, central banks, gold refiners, and gold mining companies, therefore the market is known as a wholesale market. The London Gold Market is an Over-the-Counter (OTC) market where participants trade bi-laterally on a principal-to- principal basis. Some of the London market’s trading characteristics are standardized, but because its’ an OTC market, London gold transactions are flexible on characteristics such as trade size and metal quality/fineness.

To trade on the London Gold Market, trading participants need to establish bi-lateral trading arrangements with each other, including bi- lateral credit arrangements. But London OTC gold trades are also governed by standard documentation which provides templates for participants on which they can base their bi- lateral agreements. Standard documentation includes the 1994 International Bullion Master Agreement (IBMA) and the 1997 International Swaps and Derivatives Association (ISDA) Bullion Definitions.

This statistic shows the monthly average price for an ounce of fine gold in London (morning fixing) from September 2019 to September 2020. As of September 2020, an ounce of gold cost 1,923.477

U.S. dollars, up from 1,780 U.S. dollars per ounce in September 2011.

London fixing gold price

In January 2020, the average price for an ounce of fine gold was 1,560.67 U.S. dollars. Although the monthly price for fine gold fluctuates, the average annual price of fine gold is increasing. In 2001, the price for one ounce of gold was 271 U.S. dollars, and by 2012 the price had risen to some 1,670 U.S. dollars. By 2019, the annual average gold price was 1,392.6 U.S. dollars per ounce. In 2019, gold demand reached 4,355.7 metric tons worldwide.

Price determinants of fine gold

Fine gold is considered to be almost pure gold where the value of the metal depends on the percentage of fineness. Twenty-four carat gold is considered fine gold (from 99.9 percent gold by mass and higher). London Gold Fix acts as a benchmark for the price of gold. The price of gold is set by the members of the London Gold Market Fixing Ltd undertaken by Barclays and its other members. The price is determined twice per business day at 10:30 am and 3:00 pm based on the London bullion market in order to settle contracts within the bullion market. The price is based on the equilibrium point between supply and demand agreed upon by participating banks. Gold prices must remain flexible and gold fixing provides an instantaneous

Gold Predictions in India until end of 2021

International Spot Gold moved up marginally to $1901 on Wednesday or Rs 49151 per 10 gms. In India, MCX Gold price closed at Rs 50510 or up 0.8% on Wednesday evening. US PPI Inflation numbers were at a slightly higher level and offered some support to Gold prices

According to FX Empire tech report, Resistance levels are at $ 1933 (Rs 49980 per 10 gm). Indian prices tend to be 2-3% higher. In the meanwhile, Gold mining stocks have gained 4-5% over the last one week though they are still off their August peaks. Separately, a news leak in the US could completely change the momentum of the US election.

Indian analysts expect the gold market to recover during Diwali as Indians buy gold at that time. Diwali is scheduled on 14th November. A popular investments website has published an analysis suggesting that with Dhanteras and Diwali up ahead, one should invest in gold.

However, another Indian platform forecasts gold at Rs 48821 by Diwali. That said, the World Gold Council feels Indian retail demand has been weak and higher demand appears to be coming in from western countries.

US Predictions

The global analysts are signaling a buy for Gold now while others are suggesting a sell. The Polls continue to favor Mr. Joe Biden and he is most likely to pass a Big Stimulus Bill which in turn will help Gold Prices.

Goldman Sachs says that the odds of dollar weakness have increased due to a higher probability of a Biden win and delays in the corona virus vaccine. This could be positive for the Gold.