Gold price prediction for Diwali 2019: Analysts see cost at Rs 40,000 per 10 gram!

Amid heightened trade tensions and global growth concerns, gold prices may cross the Rs 40,000 mark by Diwali, analysts have said. Currently, the October contract of gold was priced at Rs 37,995 per 10 gram on the Multi-Commodity Exchange (MCX). Anuj Gupta of Angel Brooking told IANS, "Demand for the precious metal may slow down slightly owing to some easing in trade tension between US and China, but over the trend is negative. We see gold prices around Rs 39,000 to 40,000 per 10 gram by Diwali." He said that the gold prices were surging primarily owing to the decline in global growth rate.

Experts across the globe are suggesting investment in gold and other precious metals amid these uncertain times as insurance against economic uncertainty. Gohring and Rozencwajg report said, "We now recommend all investors have a full allocation to precious metal investments in their portfolio," adding "We believe the bear market in gold has run its course and a new bull market has begun."

Notably, lower interest rate by central banks and ongoing trade dispute between the US and China were supporting the gain in gold prices. The latest worry came over the recession warning via the bond market, as the inversion in the US bond yield hit levels last seen in 2007, just ahead of the global financial crises.

This scenario came even as the US decided to defer the rise in trade tariffs it announced earlier as the major export market showed renewed signs of weakness.

Europe`s biggest economy, Germany, has also reported negative growth, nearing the risk of a recession, while the UK had already reported a contraction in growth amid Brexit woes. China reportedly added fuel to fire after it released weaker than expected factory data.

According to investment firm Morgan Stanley, if the trade war further soared via the US further raising tariffs on all goods imported from China to 25 per cent, "we would see the global economy entering recession in three quarters".

Gold may remain overvalued in relation to oil 

As gold prices have been soaring for some time now, experts feel the yellow metal will stay higher in comparison to the oil prices for a prolonged period. A recent report by Goehring & Rozencwajg has also stated that as central banks seem interested to continue their buying spree of physical gold, prices of the metal will continue to be overvalued. Both gold and silver exchange traded funds (ETF) have entered a sustained period of accumulation. 

An IANS report quoted the Goehring & Rozencwajg report as saying "As central banks now seek to accumulate physical gold alongside the ETFs, we believe gold could remain overvalued relative to oil for an extended period of time. This is just the opposite of what happened in the 1990s when central bank, producer and bullion bank selling left gold undervalued for an extended period of time." 

Notably, the two key commodities -- oil and gold -- demand are taken generally taken into account to understand vivid economic scenarios. Currently, the global trade-war has projected a decline in growth and thus pulled-down crude oil prices. Contrary to oil, the same phenomenon has led investors to park their monies in gold, analysts told IANS.

The report also noted that various large investors globally have already signaled their intension regarding gold, adding that the bear market in gold has run its course and a new bull market has begun. "All investors should have significant investments in precious metals and the related equities," it was quoted as saying.

Gold prices are currently trading near record high levels as renewed fears of a possible recession led investors to run for safe haven assets like gold. Gold prices had earlier fell sharply from its record highs after US deferred imposing fresh tariffs on imports of Chinese products.

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Notably, the Reserve Bank of India (RBI) too has been buying gold for more than 18 months as part of its foreign exchange reserves management strategy to protect itself from a volatile dollar.