Gold and Silver Prices Increase

All over the world and especially in India, people view precious metals like gold as an investment option that is capable of generating high returns over the long-term. And as a result, gold, and even silver to a certain extent, enjoy a special place in most Indian investors’ hearts. The demand for these precious metals was already experiencing a fair amount of growth ever since the start of this year.

However, the prices of these precious metals experienced a minor crash during the month of March, 2020. This was when the COVID-19 pandemic was brought to the notice of the world. As many countries began to take the threat seriously, the demand and subsequently the prices of these metals went on a sharp downturn. This was just when the fear gripped the commodity trading market. However, in a highly surprising move, the prices of both gold and silver witnessed a quick and rapid recovery after the lockdown that was announced by the government of India on the 25th of March 2020. The spurt in the prices of these precious metals can be attributed to the following reasons.

The stock market sell-off: After the lockdown was announced, the stock markets went through a turbulent phase where foreign portfolio investors (FPIs) went on a huge selling spree. This brought both the major Indian indices tumbling down to record low levels. Witnessing such deep sell-offs, the risk appetite of investors went down considerably as they started looking at other investment options that offered better safety and high returns. And this led them straight to the online commodity trading market, in particular, to gold and silver.

Price movements: The inverse relationship between the movement of gold and silver prices and the stock markets also played a huge role in the increase in the prices of these metals. Traditionally, whenever the stock markets go through a downtrend, gold has managed to reign supreme. Similarly, whenever the demand and the subsequent prices of precious metals go down, the stock markets have typically rallied. So, as the markets saw a poor run early in the lockdown, these precious metals became preferred investment options instead.

Lower returns from other investment options: Due to a series of interest rate cuts by the RBI, the yields of many fixed-income investment options like bank deposits took a hit. This prompted many investors to move to the bullion segment in the commodity trading market, thereby causing a sharp rise in both the gold and silver prices.

The spot prices of both gold and silver in the online commodity trading market continued on an uptrend throughout the months of April to July, with minor corrections occasionally. Another major surge in the prices came about in late July, with silver gaining a lot of the attention of the investors by crossing the Rs. 60,000 mark per kg. The demand for silver has managed to nearly outshine that of gold, with most online commodity trading experts and investors expecting a widening scope for further price increases.

The second week of August saw a wave of fall in the gold and silver prices. This most recent downtrend coincided with the recovery of the stock markets as investors started to again move towards equities, leading to a fall in the bullion commodity trading market participation. In fact, gold sank by almost 5% with silver taking a hit of around 13% on the 11th of August 2020.

After facing a tough week and a half starting from the 11th of August, gold and silver prices recovered once again on the online commodity trading market on the 21st of August 2020. The rise in the prices came on the back of an increasing U.S. unemployment rate, volatile equity markets, and the concerns surrounding the economic recovery process.

As long as the uncertainties in the market continue, both the gold and silver prices are expected to continue their ascent in the near term. Any further movement in the precious metals needs to be adequately supported by weakening global economic numbers like the Purchasing Managers Index (PMI). Any sign of vulnerability in these numbers is likely to reinforce gold as an investment option in the minds of investors, causing its price to surge back up.