Gold prices during the Asian session on July 17, 2020, fell amid range-bound trading. The plunge extended losses for the third day in a row. On MCX, it was noted that the August gold futures were up 0.04% after losing 0.75% in the previous session.
Silver prices also lost 0.7% after hitting record highs in the past week. Interestingly, the domestic gold prices in some countries like India have remained quite choppy. For the case of India, the domestic gold prices consist of 12.5% import duty and 3% GST.
Turning attention to the international markets, the gold prices were flat with the spot rates little changed at about $1,797.24 per ounce. Worries that surging COVID-19 cases may force countries to re-impose lockdown measures and US-China trade tensions kept the precious yellow metal strongly supported.
Gold had suffered a shard drop of almost 1% in the previous trading session. Among the other precious metals, platinum remained steady at about $824.27 while silver rose by 0.1% to reach $19.19. this year, gold had gained around 18% in the international markets expecting that the current health crisis may force the central banks to announce more stimulus.
The Pandemic Effect On Gold
The precious metal pays no interest but it seems to benefit when the interest rates fall since the drop reduces the opportunity cost of holding bullion. On July 16, the New York Fed President John Williams said that it might take several years before the US economy recovers from the damage that has been caused by the pandemic. This is not the ideal time to think about increasing interest rates.
Gold may soon witness choppy trade with the market players assessing the virus situation and the developing geopolitical issues. Kotak Securities said in a note:
“On US-China front, tensions continue to simmer between the world’s two largest economies over varied reasons like trade; the control of advanced technologies, and the protection of civil liberties in Hong Kong.”
According to the brokerage, gold which is a traditional haven asset has witnessed a positive correlation with most of the other commodities and the equity markets. That happens as the market players switch between the riskier assets and the US dollar as they assess the virus-related scenario. The brokerage added:
“Virus cases are rising globally and especially in the US; which has caused countries to reimpose restrictive measures dampening economic activity. However, market players continue to focus more on signs of economic recovery; progress in vaccine development as well as expectations of additional stimulus measures.”
With a second COVID-19 infection wave looming on the horizon, analysts are confident that gold will rise again.