Trump, Black Money crackdown impact: Gold price may shoot up to Rs 32,500 per 10 gm
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Trump, Black Money crackdown impact: Gold price may shoot up to Rs 32,500 per 10 gm

Gold, which is considered as safe haven under uncertain circumstances, saw a surge in demand on Wednesday due to both global and domestic factors.

 Renu Yadav   
  • November 10, 2016  
  • |  
  • UPDATED   11:08 IST
Trump, Black Money crackdown impact: Gold price may shoot up to Rs 32,500 per 10 gm

Gold, which is considered as safe haven under uncertain circumstances, saw a surge in demand on Wednesday due to both global and domestic factors.

Internationally, the major driver of gold prices was the victory of Donald Trump as the 45th President of the US. Apart from this, the surprise ban on Rs 500 and Rs 1,000 notes by the government to clamp down on black money and fake currency led to a surge in domestic prices.    

Gold prices today shot up to a three-year high of Rs 31,750 per 10 gm, gaining a whopping Rs 900 following the government's scrapping high-denomination notes to curb black money.

Experts believe that gold prices are poised to move higher as uncertainties prevailing in the domestic as well as international market are unlikely to die down anytime soon.
 
"Prices are poised to move higher towards the level of around Rs 31,200 per 10 gm initially with Rs 29,700 per 10 gm as a very strong support area. In coming days, we may see levels of around Rs 31,800 per gm and eventual breach of this level will pave way for higher level of Rs 32,500 per 10 gm," says Sugandha Sachdeva,  AVP and incharge- metals, energy and currency research, Religare Securities.

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Kunal Shah, Head of Commodities Research at Nirmal Bang, says, "Investment demand in gold is likely to remain robust.  Moreover, whatever has happened in India is causing surge in gold demand. Overall the trend in gold should remain bullish."  

However, the physical demand for gold has shot up overnight as people rushed to convert their black money into gold. Prices of physical gold have shot up to Rs 45,000 to Rs 60,000 per 10 gm due to tight supply in the physical market. As per sources, there was record buying of around 250 kg of gold in around three and half hours yesterday after the announcement.    

However, experts believe that ban on high denomination currencies will have short-term impact as there is a limit of Rs 2 lakh on how much a person can buy gold in cash without disclosing the PAN card number.

"There has been a risk aversion in the market and turmoil like situation because of the shock victory of Donald Trump. It ignited the safe haven demand for gold and prices rose to a five-week high," says Sachdeva. "Trump's victory is in favour of gold as there are a lot of uncertainties prevailing in the market about his policies.  Uncertainties are good for the safe haven demand for gold."

Apart from this, experts are expecting that the US Fed may delay its rate hike decision, which will favour the support the gold prices.

Sachdeva says, "Trump may try to have more control over Fed as he may chalk out his own policies. It is expected that the rate hike which was expected to happen in December may be postponed. If the current run in gold prices continues and if the current high of the year $1,377.5 an ounce seen in July is breached , it would actually usher in an era of firm bull run in gold prices where in prices can even  move to a level of $1,460 as well."

Experts say that investors should use these corrections as good buying opportunities for medium to long term prospective.

With PTI inputs