2019 has been a spectacular year for gold in India. Not only did the precious metal post significant gains during the year but also came out of a six-year trading range.
The Multi Commodity Exchange (MCX), the Indian commodity exchange, also had recorded an increase of 25% in gold prices during the year.
Market analysts strongly believe that the bullion will continue to gain momentum in 2020 despite the sharp rise in prices the previous year.
With gold having been a safe-haven asset for too long now, it will continue to persuade investors and market participants amid a growing global debt crisis and the losing US dollar index.
Also, with most of the central banks showcasing a dovish stance, i.e. opting for a low-interest rate regime in their monetary policies, safe-haven demand is expected to rise further during the year.
According to experts, the gold prices are expected to touch levels as high as USD 1,700 per ounce during its bullish run in 2020.
The geopolitical tensions coupled with the trade war, which has continued for too long now has resulted in market participants choosing to remain invested in the bullion over the last year.
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The sharp spike in the gold rates could be the result of the strong safe-haven demand that was compounded by the year-long US-Chinese trade dispute and the geopolitical tensions in the Middle East which occurred towards the end of the year.
Despite the rise in prices globally, the demand for gold in India remained pretty much on the lower side as prices touched Rs.39,885 per 10 grams – an all-time high – on MCX.
Also, domestic demand remained capped for much of the year with the Centre hiking the import duty on gold.
As of now, an import duty of 12.5% coupled with a 3.5% Goods and Services Tax (GST) is levied on the gold price in India.
However, demand picked up in Q4 of 2019 as buying interest was rejuvenated soon after the prices were corrected during the same quarter.
Analysts expect the same trend to continue in 2020 with market participants remaining invested in the bullion amid the ongoing geopolitical tensions and the continued trade war, spurring demand for the safe-haven asset.
For any clarifications/feedback on the topic, please contact the writer at viswanathan.v@cleartax.in
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