World Gold Council Predicts Higher Gold Price Volatility in the Near Term

SEATTLE (Scrap Monster): The Investment Update released by the noted that Covid-19 pandemic has boosted gold’s relevance as a hedge and accelerated the recent upmove in prices. Incidentally, the prices of the yellow metal edged higher by 10% in the month of July 2020 alone. The prices are just below the record levels witnessed in 2011.

The gold’s performance has significantly outpaced all other major assets so far in 2020. The prices have skyrocketed by almost 27% year-to-date. The extremely high uncertainty and very low interest rates supported investment demand for gold. The impacts of the pandemic on global economy are yet to be determined. On a global level, economy is likely to witness a bumpy ride, which in turn will benefit gold.

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Meantime, the negative impacts of the pandemic on economic growth, coupled with stringent lockdown measures have led to sharp decline in consumer demand for gold so far this year. The jewellery demand has dropped by almost 46% in the initial six-month period of the year. Also, bar and coin demand has plunged by 17%. WGC observed that the health of the gold market and its price behaviour is closely tied to consumption trends.

The ongoing weak trend in consumer demand is likely to lead to higher volatility in gold prices in the near term.