Gold may turn haven for investors amid trade war

Kolkata: Investment demand for gold may see a steady rise in India, with prices for the traditional store of value rising to a five-week high on Monday amid the threat of an escalating trade war between the US and China.

“Uncertainty has gone up following the trade war between the US and China, resulting in a climb in gold prices,” said Sekhar Bhandari, business head for global transaction (banking and precious metals) at Kotak Mahindra Bank. “The yellow metal can become a safe haven again.”

Prices are expected to remain firm in the April-June quarter, and may even touch $ 1,380 – $ 1,400 a troy ounce, Bhandari said. In Mumbai’s Zaveri Bazar, gold was trading at Rs 30,700 per 10 gm on Monday. The prices exclude the 3 per cent Goods & Services tax (GST).

Indian investors will likely choose sovereign gold bonds (SGB) over bars and coins. “The market is expecting another tranche of sovereign gold bond around Akshaya Tritiya, which is on April 18,” said trade analyst Bhargav Vaidya.

SGB has been able to mobilise 22 tonnes of gold since it was introduced three years ago. In 2017, investment demand of gold totalled 164.2 tonnes, 2% higher than 2016.

The flow of investment into gold will likely be steady despite uncertainties in the equity markets. “Even though the equity market is volatile because of the impending trade war, we do not expect Indian investors to suddenly shift a portion of their investment in the markets to gold. However, there will be a steady rise in investment in gold in the form of bars and coins,” Vaidya said.

Although gold demand on Gudi Padwa (March 18) was higher compared with January and February, it was 25% less than that in the previous year, said Nitin Khandelwal, chairman, All India Gem & Jewellery Trade Federation (GJF).

Analysts such as Prathamesh Mallya of Angel Commodities Broking said that spot gold prices have risen 2.5% in the international market. “The trade war… has heightened the risk and uncertainty for investors across the globe, in turn burnishing the safe-haven appeal of the yellow metal,” he said.