Volatility in world markets has once again brought gold to the fore, with the price of yellow metal rising sharply worldwide. In India, it is approaching the level of 45,000 rupees.
It is a boon for investors holding gold traded funds and gold sovereign bonds (SGB). Currently, it may be the only instrument to provide returns based on the money invested.
While spot gold markets are closed across the country, the price of the Indian Bullion Jewelers Association, which still acts as the target price, rose sharply on Wednesday, jumping almost 3% to close at Rs 43,250 for 10 grams (999 purity).
Although the cash market is closed, the upward trend is even reflected in the listed SGB prices. SGB are also accepted as a guarantee.
According to Ajay Kedia, director of Kedia Advisory, in the international market “there was a huge demand for the dollar among international investors, and traders were seen buying gold, since both are considered currencies worldwide. Following the COVID-19 lockout, refineries in the United Kingdom had to either keep their operations closed or operate at lower capacities, which pushed up the price of gold.
The international price of gold is $ 1,620 per ounce. Compared to this, domestic prices are discounted.
Discounts are higher in MCX futures due to the massive sale of April futures. On the MCX, several traders were bearish and had sold gold in recent days. They thought they would buy gold after the markets opened after March 31. However, since the lockout will last longer, gold delivery is not possible.
Following the sale on the MCX, the futures market price is at a discount of Rs 2,000 per 10 grams compared to the landed cost of gold. The landed cost is used as a reference. Gold imports were also halted following the blockage.
Currently, the open interest or speculative position on MCX’s April gold futures contracts is 3.4 tonnes. In futures, the top 10 long open positions are 10,166 lots, while the top 10 short positions are 17,791 lots, based on Tuesday’s close, indicating that the short positions were significantly higher than long positions.
Also on a global scale, refineries have been closed or are malfunctioning. In Peru and Chile, mines – including gold mines – have been closed due to fear of the virus.
As a result, gold or partially refined gold was not supplied to refineries, even in Switzerland, where the lock is not so rigid.