Gold prices in India on Monday continued to gain for the second day in a row tracking firm global rates as worries over the friction between the US and China and bleak US economic data underpinned the safe-haven metal.
June gold contracts were trading up by 1.02% at Rs 47,865 per 10 gram at 11:08am on the Multi Commodity Exchange (MCX). Silver futures were trading more than 3% higher at Rs 48,280 per kg.
Globally, gold rose over 1% on Monday to its highest in more than seven years as dismal US data underscored how badly the coronavirus pandemic has damaged the world’s top economy.
Spot gold was up 1.1% at $1,760.85 per ounce by 0402 GMT, after rising to its highest since October 12, 2012, at $1,763.51. US gold futures gained 0.8% to $1,770.50.
“Markets are pricing in that the (economic) recovery is going to be a little slower than previously expected, and that’s probably going to require an environment of lower rates,” Kyle Rodda, IG Markets analyst, said while speaking to Reuters.
Rodda added that Friday’s “really poor” US economic data was the big catalyst.
US retail sales and industrial production both plunged in April, putting the economy on track for its deepest contraction since the Great Depression, data showed on Friday.
Federal Reserve chairman Jerome Powell said a US economic recovery may stretch deep into next year and a full comeback may depend on a coronavirus vaccine.
The Bank of England is also looking more urgently at options such as negative interest rates as the economy slides into a deep coronavirus slump, according to its chief economist.
Gold is considered an attractive investment during times of political or economic turmoil. Lower interest rates also reduce the opportunity cost of holding non-yielding bullion.
Adding to the bleak economic scenario was renewed Sino-US friction, with China’s commerce ministry on Sunday saying it was firmly opposed to the latest rules by the United States against Huawei and would take all necessary measures to safeguard Chinese firms’ rights and interests.
“There is increased volatility as the rhetoric is becoming very hot, and especially from the United States. That is manifesting some weakness in growth-sensitive markets, and in particular China-sensitive markets,” Rodda said.
Reflecting investor sentiment, SPDR Gold Trust holdings, the world’s largest gold-backed exchange-traded fund, rose 0.8% to 1,113.78 tonnes on Friday.
