Gold price resumed their record run on Wednesday, inching close to the Rs 40,000 mark in Delhi as trade war concerns and global growth weighed on equities. Global gold prices jumped over 1 percent over escalating US-China trade worries and weak US economic data. Moreover, depreciating India rupee and weakness in other regional currencies against the US dollar also boosted gold prices. Experts believe gold rates may surge to Rs 40,000-41,000 with the support of weak global cues and the rupee.

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Gold prices in Delhi jumped Rs 300 on Wednesday to Rs 39,970 per 10 gram, while sovereign gold rates soared to Rs 29,800 per eight grams. Global spot gold rate was up 1 percent at $1,540.57 per ounce and US gold futures for December settled 1 percent up at $1,551.80.

The Indian rupee declined by 29 paise to close at 71.77 against the US dollar on Wednesday as fears of an impending global recession prompted investors to stick to safe-haven assets like the Japanese yen.

PR Somasundaram, MD-India at World Gold Council, said gold prices in India advanced over 20 percent this year, but demand remained a matter of concern. “We are dealing with higher import duty, erratic monsoon, slowing economic growth and then very volatile and all-time high gold prices and the demand really seems to be taking a backseat amongst all of this," Somasundaram told CNBC-TV18 on August 21.

More buying?

Somasundaram expects demand for gold to rise as prices are likely to rise amid a dim outlook for equities across the globe over trade tensions and growth concerns. He also noted that recycling of gold is also likely to increase.

“We also believe that the trade will offer quite a lot of discounts because they are sitting on stocks, so they have to definitely run quite a good scheme. You may have quite a lot of investors actually moving into gold. So the bars and coins demand in particular we will see might jump,” he said.

Kotak Commodities head Ravindra Rao says he won't be surprised if spot gold prices shoot past the $1,950 per troy ounce level to log fresh all-time highs. "In a month or so we can see gold per 10 grams soar to Rs 40,000-41,000 but if the rupee does not support then it might not," Rao said.

"Gold prices are indicating that global worries are still intact. This worry has started since the last 2-3 years, now that is escalating. If we compare gold with S&P and gold with bond yield, still the ratio is very low, so gold has a lot of steam left to go much higher," Rao said.

Yields on gold funds offered by mutual funds rose to 27.65 percent in the 12 months ending August 23, outperforming equity and debt fund categories, showed Value Research data. Compared to gold, all equity fund categories have delivered negative average returns in the last one year.

Returns on small equity funds were negative 18.76 percent in the last one year period, while debt funds returns remained in the range of 0.36 percent to 19.37 percent.

First Published:Aug 29, 2019 11:05 AM IST