Gold price may fall another 8 per cent
A recovery in gold prices will largely depend on oil prices, financial market performance, travel restrictions and the Covid-19 spread in coming months.
Dubai - Yellow metal dives as investors embark on selling spree to hoard cash.
By Waheed Abbas
Published: Sat 14 Mar 2020, 8:42 PM
Last updated: Sun 15 Mar 2020, 6:03 PM
Gold price will remain under pressure in the coming two weeks due to the fast-spreading coronavirus and its impact on global travel. The yellow metal is likely to fall another 8 per cent to $1,400 an ounce by the end of this month, say industry executives in Dubai.
They foresee a recovery in prices largely depending on oil prices, financial market performance, travel restrictions and the Covid-19 spread in coming months.
Gold tumbled as much as 4.5 per cent on Friday, its biggest weekly loss since 1983, as investors embarked on a selling spree to hoard cash and meet margin calls across other markets that have been battered by the impact of the coronavirus outbreak.
But the recovered later and spot gold closed 3.78 per cent lower at $1,529.71 per ounce on Friday.
For the week, the yellow metal was down more than 9 per cent, the most since 1983. It has shed nearly $200 from Monday's over seven-year peak of $1,702.56 per ounce.
Anil Dhanak, managing director of Kanz Jewels, said gold price is fluctuating on account of worries about the economic impact of coronavirus after the US suspended travel from virus-hit Europe.
"This travel ban was a surprise as well as a big shock to the market. We can state that gold is now feeling the pinch from the fall in financial markets and travel ban. I feel that the price might come down to around $1,400 by the end of March and will go up later, said Dhanak.
Joy Alukkas, chairman of Joyalukkas Group, said following the drop in prices, they are not very optimistic about the next two weeks because of the alarming spread of coronavirus as people's priority will be their safety and health during this difficult time.
"Low gold prices should hopefully have a positive impact on gold purchase in the next two weeks," he said.
Suki Cooper, analyst at Standard Chartered Bank, said since stock markets continue to be under pressure and there is a push towards liquidity across the markets, it wouldn't be unusual for gold prices to sell off as well.
"In the near-term, gold could see further downside because of the need to meet margin calls across other markets and if investors are preferring to move to cash and reduce risk exposure across the board," she said.
Vinay Jethwani, partner at Meena Jewellers, says economic impact due to Covid-19 is quite rampant across diverse industries and the bull run of gold is also threatened.
"The markets crashed last week and gold followed them and prices skyrocketed because investors wanted to meet their margin call commitments from the crash of other asset classes like stock market. The bull run of gold is definitely threatened by the latest crash in prices. We have to wait and watch the level of investor confidence after the market settles down," he said.
Jethwani believes that global financial markets will stay unpredictable and volatile for the coming one month and to a large extent, depending how coronavirus is contained.
Chirag Vora, director at Bafleh Jewellers, believes that the commodity will see a 3-4 per cent fluctuation in daily prices in coming weeks.
"The measures taken by developed countries will definitely have a major impact on the prices of gold. The US travel restriction on Europe saw a major surge in gold prices. For the next couple of weeks, we will definitely see a 3-4 per cent daily up-and-down movement in the prices of gold. If the virus is not restricted soon, we foresee gold prices to rise as it is one of the safest assets held during crises time," said Vora.
Financial markets and commodities have been badly shaken this month, firstly due to the fast-spreading Covid-19 and then the collapse of Opec+ talks on March 9, resulting in oil plunging over 30 per cent in a day.
Shamlal Ahamed, managing director for international operations at Malabar Gold & Diamonds, said gold performed well as an investment in 2019 and the trend continued into 2020 as well.
"We expect the trend to continue. On a retail level, purchases and advances are gaining momentum as customers are taking advantage of the current dip in prices," he said, adding that oil price, global stock market performance and Covid-19 will play a critical role in determining the price of gold in the coming days."