Gold has room to go beyond $2,800
Overseas investors remained net buyers in Indian markets by investing a net Rs 8,327 crore in the first week of August. Foreign portfolio investors invested a net Rs 7,842 crore in equities and Rs 485 crore in the debt segment during Aug. 3-6, according to depositories data. FPIs have been net buyers in the past two months. They invested Rs 3,301 crore in July and Rs 24,053 crore in June on net basis.
At $2,070 an ounce, gold touched a new high last week and has moved up more than 30 per cent since the break of Covid19 pandemic. However, when adjusted to inflation, the record price is lower than 1980 January as well as September 2011 record-high levels. This provides room for gold to move beyond $2,800 per ounce.
"Adjusted for inflation, the gold price today is $200 shy of the 2011 level and well below its January, 21,
1980 record high equivalent to approximately
$2,800 per ounce in today's money," says a World Gold Council report.
Gold had hit a record high of $850 an ounce in January 1980 as investors piled up bullion to beat high inflation due to strong oil prices, the Soviet Union intervention in Afghanistan and the impact of the Iranian revolution. If adjusted to inflation, this would have translated to $2,800 per ounce in today's scenario. Similarly, in September
2011, gold had made a high of $1,920 per ounce and if adjusted to inflation, it would have been close to
$2,200 per ounce. Further, the report finds that the gold price had more than doubled from about $900 per ounce in early 2008 to its high more than three years later in the aftermath of the global financial crisis. In contrast, it has increased by 30-34 per cent since the beginning of the Covid-19 pandemic.
The current price movement of gold has been driven by high levels of global uncertainty and very low interest rates. The Covid-19 pandemic is far from over and more importantly, its impact on the global economy is yet to be determined.
Central banks have aggressively cut interest rates, often in combination with quantitative easing and other non-traditional policy measures. Governments have also approved massive rescue packages to support their local economies. These initiatives have increased concerns that easy money, rather than fundamentals, is fuelling the stock market rally and all the extra money being pumped into the system may result in very high inflation or at the very least, currency debasements.
"The re-emergence of infections seen in Japan, Australia, South Korea and Vietnam and upturn in infections seen in the US, Russia and India could trigger the reimplementation of lockdowns and containment measures. The more delayed the complete reversal of the great lockdown, the slower the economic recovery. With this background, it is hard to imagine a scenario where central banks around the world will change their accommodative stance any time soon," said Chirag Mehta, senior fund manager-alternative investments, Quantum Mutual Fund.
Further, despite record inflows into gold ETFs in 2020, gold remains an under-owned asset. The market share of Gold ETFs, compared to all ETF assets, jumped from 3 per cent to 8 per cent in the aftermath of the global financial crisis before dwindling to one per cent levels in the following years. The current figure stands at 3 per cent, indicating significant potential for Gold ETF asset expansion going forward, says Mehta.
TikTok plans to file a federal lawsuit as soon as Tuesday to challenge President Donald Trump's executive order banning the video-sharing service from the US as unconstitutional, National Public Radio reported.
The lawsuit will be filed in the US District Court for the Southern District of California, where TikTok's American operations are based, NPR said, citing a person familiar with the matter whom it didn't identify. It will argue that the president's action is unconstitutional because it failed to give the company a chance to respond and that the US government's nationalsecurity justification for the order is baseless, according the report.
Chinese-owned TikTok responded in a blog post on Friday it is "shocked" and will pursue all remedies available, including in US courts. A company spokesman reached by phone on Saturday declined to comment on the NPR report and referred to the earlier blog post.
Trump signed executive orders on Thursday prohibiting US residents and companies from doing business with TikTok and Tencent Holdings' WeChat apps, effective in 45 days, citing the national-security risk of leaving Americans' personal data exposed. A 1977 law lets the US president declare a national emergency in response to an "unusual and extraordinary threat."