Volatility in gold to continue on US-Iran conflict: WGC

New Delhi, Jan 6 (IANS) As gold prices touched Rs 42,000 for 10 grams on Monday in the wake of the US-Iran conflict, World Gold Council said the volatility in the yellow metal prices will continue and consumer demand will face a headwind because of this.


"There will be volatility (in Gold prices) with an upward bias as we see. Volatility is not good for consumer demand. When the gold price moves upward one way, jewellery industry bears the brunt of the consumers indecision," Somasundaram PR, MD, India, World Gold Council, told IANS in an exclusive interview.

He said gold prices went up on Monday by 1.62 per cent on global rates, and Indian rates have touched Rs 41,096 on MCX.

"We have to wait and see how the impact on rupee and Indian prices goes up further. More important is people's expectation of what's going to happen on the oil and gold due to the Middle East crisis with Brent crude at $70 per barrel. The situation is volatile. There is a general impression the volatility will continue in 2020. WGC does not forecast price in gold. But we do believe given that there is an election is US in November, and the Middle East crisis is not something which looks like disappearing in a very short while, there will be enormous volatility. There is also the China-US trade dispute which might have a spin to the whole thing", Somasundaram said .

The India head of the WGC at the same breath also added that the developments in the Middle East is more or less factored in the gold prices now.

"We will continue to see volatility not exactly one-way (just going up or going down only) because Middle East tension is now factored. So market will consume this tension as well and move on unless some other new development happens, the uncertainty has now been absorbed. We do believe it (volatility) will act as a headwind in consumer demand in 2020" he said.

Somasundaram said also now that the prices have gone up, consumers will demand more from jewellers in terms of purity. It's also going to change the consumer demand from the industry.

Gold prices on Monday surged to a record high, jumping by Rs 1800 per 10 gram in 2 days. Spot Gold on Monday jumped over 2 per cent to $1,587 an ounce, the highest level since April 2013 owing to the escalating US-Iran geopolitical tension. Other safe haven assets also edged higher owing to the war-like situation between the two biggest oil producing countries, the US and Iran. Gold prices also drew support from the weakening rupee against the US dollar, as India is one of the biggest importers of Gold. Bullion prices jumped to Rs 41,096 per 10 gram.

The rupee slipped beyond Rs 72 a dollar. At 1.39 p.m., it was trading at Rs 72.02 a dollar, 21 paise weaker than the US dollar.

On MCX, February gold futures surged 2.3 per cent to a record high of Rs 41,030 per 10 gram. On Friday, gold prices had surged over 2 per cent or Rs 850 per 10 gram taking two-day gain in gold prices in domestic markets to about Rs 1800 per gram as Middle East tensions increased the appeal of safe haven assets like gold.

Silver rates also spiked on Monday. Silver futures on MCX rose 2 per cent or Rs 947 to Rs 48,474 per kg.