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Gold bars and stok market

Coming up “golden” when the dollar falls and inflation bites

Gold bars and stok market

In October gold prices moved upwards as volatility affected other markets including oil.

Photo: forex.info

Traditionally, investors want to invest in or buy gold to protect against volatility and uncertainty. The preference for physical assets make some investors view gold as a safe haven, an asset to buy when other assets are losing value.

In trading up to the third week in October, gold prices fell back amid uncertainties surrounding Britain’s negotiations to leave the European Union.

Gold jewellery (Photo: Reuters)

At mid-month spot gold was trading 0.1 per cent up at $1,482.80 per ounce, having touched a low of $1,473.88 on Friday October 11, its lowest since October 1. U.S. gold futures were 0.2 percent higher at $1,486.90 per ounce.

Broad trends for the commodity are tracked by the World Gold Council which says the structure of the gold market is facing an unprecedented wave of change resulting from evolving

Gold prices fell in October amid uncertainty about Britain’s place in the EU.
(Photo: outlookindia.com)

In the West, investors tend to turn to gold when inflation rises or the value of the currency goes down. Therefore, in times when inflation remains high over a longer period, gold becomes a tool to hedge against inflationary conditions. This pushes gold prices higher in the inflationary period.

Under normal circumstances, there is a negative relationship between gold and interest rate when rates go up, investors flock to fixed-income investments that yield a fixed return unlike gold.

“Investors may opt for owning  the metal physically in the form of jewellery, coins, and gold bars. They may also  invest in  gold exchange traded funds (ETFs) and sovereign gold bonds (SGBs).”

 Overall, the World Gold Council states that the market’s demand profile continues to shift towards the East with China and India alone comprising more than half of

The World Gold Council notes that the financial markets have seen a wave of

“The Council notes as well that technology innovation is disrupting many sectors and the way gold is traded will likely not be immune.”

There is a broad shift across asset classes from OTC markets towards transparent trading on

Head of Kotak Commodities, Ravindra Rao

Banks, the primary intermediaries in the wholesale market, typically face higher capital and collateral costs by trading OTC. The World Gold Council notes that in recent years many banks have retrenched or exited the commodity markets due to capital constraints, market consolidation and cyclical considerations.

The Council notes as well that technology innovation is disrupting many sectors and the way gold is traded will likely not be immune. Blockchain technology, in particular, holds promise in offering a more robust, operational and cost efficient mechanism for facilitating the settlement of gold transactions.

As October nears its end, the weaker greenback continues to be a fillip for the precious metals markets.