On Friday witnessed a sharp rise in both gold and silver prices domestically, in tandem with a rally in international rates. MCX revealed that October gold futures increased 1% to Rs41,399 per 10 gram while silver rates boosted 1.5% to Rs51,399. During volatile international rates on Thursday and Friday, Indian gold prices saw big swings. But overall gold prices in India nonetheless remain down about Rs5000 per 10 gram as compared to its August 7 highs of Rs56000.
Internationally, gold prices rebounded over 2% on Friday, helped by a weak US dollar and the US Federal Reserve’s signalling a prolonged low-interest-rate strategy. US gold futures settled up over 2% at 1,974 an ounce. Gold rates had plunged over 2% on Thursday after US Treasury yields gained following a speech by Fed Chair Jerome Powell on US central bank’s new strategy.
The Fed chairman on Thursday said the central bank would adopt an average inflation target, meaning rates are likely to stay low even if inflation rises a bit in the future. Low-interest rates tend to support gold, which is also a hedge against inflation and currency depreciation.
Massive stimulus pumped into the market by central banks and governments to prop up their coronavirus-damaged economies has helped gold gain over 28% this year. “The US Fed’s intention to keep interest rates at rock-bottom for an extended period even if inflation kicks in is an important hint that the world will witness a great deal of liquidity for a longer period of time. This decision will lead to elevated levels in various asset classes such as gold, metals and of course equities,” says Nirali Shah, Senior Research Analyst, Samco Securities. Meanwhile, analysts suggest the biggest risk to gold is the discovery of a vaccine and a sharp correction in stocks.

Back in India, the sixth tranche of sovereign gold bonds of this fiscal will open for subscription on Monday. The Reserve Bank of India, which issues a gold bond on behalf of the government, has fixed the rate at Rs 5117 per gram. The issue closes on September 4. Investors applying online and making the payment against the application is made through digital mode get a discount of Rs 50 per gram.