January 01, 2020 (MLN): No doubt, the calendar year 2020 was the one that left a lasting mark on history. A lot of things changed for the better and some for worse. This year 2020 has been one of the best years for the gold investors with a return of 29% in rupee terms as 24-karat gold closed at Rs 97,737 per 10 grams in the domestic bullion markets against the previous year closing of Rs 75,790 per 10 grams.
Due to risk aversion and uncertainty arising out of COVID-19 disruptions, investors flocked to a safe-haven investment such as gold, taking its price to an all-time high of Rs 113,169 per 10 grams, seen on Aug 07.
Today, the price of 24 karat edged up by Rs 300 to Rs 114,300, stretching their advance to a sixth straight session, in the domestic bullion market against the price of Rs 114,000 per tola reported yesterday.
According to the data provided by the All Sindh Saraf and Jewellers Association, the price of 10-gram gold moved up by Rs 257 to stand at Rs 97,994 against the price of Rs 97,737 reported in the previous session.
On the other hand, the price of silver tola and 10-gram silver tola remained static at Rs 1,320 and Rs 1,131.68 respectively.
The coronavirus pandemic and the unprecedented liquidity flushed by central banks triggered sharp buying in the yellow metal in the global bullion markets in CY20.
According to data compiled by Mettis Global, gold prices surged to an all-time high of $2,070.48 per ounce (oz) on Aug 6 as investors sought refuge in yellow metal in the wake of the Covid-19 pandemic that brought global economic activity to a standstill.
Initially, gold prices had fallen amid economic uncertainties caused by coronavirus pandemic that provided a boost to the US Dollar Index. The gold rate hit a low of $1463.91 an ounce, witnessed on March 19.
However, as a result of the reopening and a gradual increase in economic activity, the price of the yellow metal slipped to $1896.54 per ounce till Dec 31. Nevertheless, it has been one of the better and less risky asset classes with a gain of 25% in CY20.
Record rally in gold prices took a breather since mid-November as the news of the Covid 19 vaccine affected prices. Over the past few months, gold prices have dropped by 8.36% from a record high, achieved on August 6 as a result of the rotation of money from gold to equities.
On Friday, gold was trading marginally higher at $1,899 per ounce in the international market while silver was pegged at $26.44 per ounce.
As per analysts, despite ample liquidity in the financial markets, the inflation outlook remains low in major economies and the major central banks might keep their policies dovish until they see a dramatic increase in inflation readings, suggesting investors to increase gold allocation in their portfolio in 2021.
On the other hand, as the Covid-19 vaccine rollout gathers steam in different parts of the world, analysts expect that a return to normality could make riskier assets more attractive, especially in the second half of 2021, and diminish the demand for the gold. As the period of healing has started, gold might fall like the rock it is. It happened after the sovereign debt crisis when gold lost more than 40% of its value, implying that investment in this precious metal seems like a bit of a gamble.
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