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Why Gold Prices Surged to an all-time High In the First Week of August?

Gold prices are marking new records since the start of this month, on Tuesday it reached the level of $2,000 a troy ounce for the very first time in New York trading. The prices of this yellow metal gained a very high momentum during this crisis.

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Gold prices on Friday touched an all-time high of Rs. 57,008 per 10 grams in Delhi. Silver prices, too gained a high momentum, touching an all-time high of Rs. 77,840 per kilogram.

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According to the experts, this yellow metal has soared nearly 35 percent in 2020. But why?

In order to understand why Gold Prices have surged this month, one needs to know about different types of gold markets and the relationship between them.

Gold Market: An overview

There are two gold markets and both of them are closely linked with each other because of investment banks and other big players which paly an active in both of these markets.

  1. Physical market- It mainly consists of banks, central banks, electronics manufacturers, miners, refiners, jewelers, and investors.
  2. Futures market- This mainly deals with financial contracts based on gold. It helps in predicting the prices of the gold without actually holding the metal.

And these two markets are directly linked with each other.

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Why the prices are increasing?

The gold prices have a relationship with volatility unlike other asset classes, that have more significant economic uses. While other asset classes like bonds and stocks don’t go with increased volatility but gold tends to benefit amid periods of higher volatility. Thus, the gold market is likely to continue to find plenty of buyers.

“Spot gold prices for 24 carats in Delhi continued to scale new highs by gaining Rs 6. Gold price are trading higher for the 16th consecutive day in India,” HDFC Securities Senior Analyst (Commodities) Tapan Patel said.

Meanwhile, in the international market, the prices of both gold and silver were trading marginally lower at $2,061 per ounce and $28.36 per ounce, respectively.

 

Also read: FPI have pumped in a net Rs 20,574 crore into the Indian capital market in June