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Rising price may hit physical demand for Gold, say Experts

Gold hit a fresh closing high of ₹36,894 on Wednesday as international prices of the metal climbed to six-year highs amid the ongoing trade-tariffs standoff involving the world’s two biggest economies.

Gold could test the ₹40,000/10 gm mark this year, threatening to crimp physical demand for the metal that remains a key store of value with Indian savers.

International spot gold was trading on Wednesday above $1,500 an ounce (31.10 gm appx), levels not seen in six years.

Nitin Kedia, business head of Kedia Commodity, said that international gold had broken a technical level around $1,475.5 /oz, and the next resistance could kick in at $1,576.

“This gives gold the potential to head for the ₹40,000 per 10 gm mark,” added Kedia. “There is a possibility that before heading for that level, gold could correct to $1,475 odd.”

The central bank, in its third bimonthly policy, attributed the rise in gold prices to “increased safe haven demand (amid) downside risks to growth.” However, the high prices along with increased customs duty have dented demand.

“There has been weak consumer sentiment, especially in jewellery with additional factors like price volatility and increase in customs duty,” Titan said after first-quarter earnings.

To be sure, industry body IBJA’s national secretary Surendra Mehta expects a short-term correction in global prices at $1,420 levels, as all the “negatives like fallout from trade tensions, weak global growth, etc were priced in. Current levels don’t merit buying in this context.”

Gold has shot up by over $115 an ounce in the past 30 days due to increase in global trade tensions.

Jewellery demand was up 12 per cent on year at 168.6 tonnes in the June quarter. But World Gold Council warned that “the duty on gold was raised by 2.5 per cent . Although we do not expect this to have a long-term impact on gold demand in India, we do see it having a dampening impact on Q3, particularly as gold prices have remained elevated.”

Courtesy - Economic Times

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