Image used for representation.
Doha: Gold prices in the local market have surged around 16 percent in the first half of this year, driven mainly by the uncertainty created by COVID-19 outbreak. Rise in the prices of gold in the first six months of this year is almost equal to the increase seen in the entire 2019.
The prices of yellow metal had risen around 17 percent, last year. At the start of this year, a gramme of 22-carat gold was trading at around QR176 while it was trading at around QR204.50 per gramme on June 30, showing a rise of around QR28.50. Gold prices had risen by around QR26 in 2019.
The unabated upward trajectory of gold prices is not good news for consumers, as it has severely impacted their ability to buy the precious metal. It is also a big dampener for the market as high prices usually dent the demand for gold.
“The demand for gold was good during the first couple of months of this year. We were pinning hopes on Ramadan and Eid. In Qatar, customers throng to jewellery stores to buy gold during the holy month and Eid. The majority of the demand is for jewellery,” a marketing manager of a jewellery showroom told The Peninsula. “In terms of demand, this year has not been good so far. COVID-19 outbreak has adversely impacted the local demand because retail customers have turned cautious,” he added.
One of the main reasons for the increase in the prices of gold is the outbreak of COVID-19. The virus outbreak has created uncertainty globally and gold prices tend to rise in uncertain times.
Countries across the world are under lockdown, which has crippled economic activities, which has lead to volatility in global financial markets. Investors consider gold as an efficient tool to hedge against inflation and economic uncertainties.
In times of a crisis, investors globally view gold as a safe haven which increases its demand. The direction of gold prices in the future depends on various factors, such as inflation and interest rates. Decisions of central banks across the major economies regarding interest rates and inflation affect the price of the metal.
A weaker dollar fuels demand of gold by making it cheaper for holders of other currencies, while lower bond yields reduce the opportunity cost of owning non-yielding bullion. Gold is highly sensitive to the rising interest rates because they push up bond yields and tend to boost the dollar. Experts say that gold prices are expected to remain high, as long as there is uncertainty in the global economy.
