NEW DELHI: Gold prices fell by nearly Rs 2,200 in just two days after the yellow metal crashed by Rs 1,097 — to Rs 42,600 per 10 gram — in the national capital, as anxiety over the economy in the aftermath of the unfolding coronavirus pandemic saw a meltdown in stocks and commodities. Gold prices had tumbled by about Rs 1,100 per 10 gram on Thursday.
Silver prices too crashed by Rs 1,574 to Rs 44,130 per kg on Friday, from Rs 45,704 per kg the day before, having fallen by Rs 1,600 per kg. Analysts said that gold, which is normally seen as a safe haven in times of financial or political stress, is being sold by investors to meet liquidity needs as stock markets across the globe crashed this week.
“The global meltdown in equities and other commodities meant that large investors who normally invest in all classes of assets needed to be more liquid to meet margin calls. Hence, despite gold climbing to all-time highs earlier this week, started shedding significant value later this week,” said Amit Banerjee, an independent merchant banker.
In US markets, gold dropped for a third straight day on Thursday, with a drop from $1,704 to $1,551 an ounce. However, it is expected that with liquidity announced by the US Federal Reserve through injections in the bond market, gold may bounce back again.
BlackRock’s Global Allocation Fund said in a report that “with both nominal and real, i.e., inflation adjusted interest rates in free fall, gold is well positioned to do what it is intended to do: help insulate a portfolio. To the extent the coronavirus represents a threat to growth, gold should be a particularly effective hedge,” the report said.