What is the impact of coronavirus on gold prices in India?
After the coronavirus or COVID-19 became a global pandemic, investors are turning to gold globally considering it the safest option to curb the economic distress. Gold prices have remained steady since the last week of March in India. Investors are now shifting to cash by selling off their assets due to the pandemic and due to this, the price of the gold had dipped considerably in the last month.
The investors in the country are investing in the bullion market for its safe-haven demand due to global economic distress. The price of gold in the country opened at Rs.4,253 per gram for the month of April and remained steady until the end of the first week of the month at Rs.4,253 per gram.
India is the largest consumer of gold in the world and accounts for a quarter of the world’s total consumption of gold. India uses gold primarily in the form of jewellery and secondarily for investments. Gold rates in India change on a daily basis depending on many factors. These include the demand and supply, global market conditions and currency fluctuations in the country.
Gold in India is a solid instrument for investments even before the pandemic arrived. Traders in India invest in gold bullion as it is considered a safe option. Gold prices have reached an all-time high in India due to the pandemic, but a large part of this has been driven by depreciating rupee and increased import duty. It must be noted that gold prices in India include 12.5% import duty and 3% GST. On the other hand, international gold prices are much lower than the all-time high price.
When the markets are shut and the world is facing an economic slowdown, the Government of India will open subscriptions starting 20 April for the people to invest in Sovereign Gold Bonds. The Reserve Bank of India will issue the SGBs on behalf of the Government of India. The SGBs will be issued in six tranches from April to September. This will allow the investors an alternative to investing in gold with a fixed interest of 2.5% per annum.