The price of Gold rose 1 per cent to a new high on Monday, as increasing number of coronavirus (Covid-19) cases and intensified geopolitical tensions increased its safe-haven appeal amid growing concerns over growth in global economy.

Standard gold in Mumbai’s popular Zaveri Bazaar continued its Friday rally and opened at Rs 48,107 per 10 grams but closed with a marginal decline from this level at Rs 47,937 on Monday. Silver gained 2 per cent up to Rs 49,061 a kg in the morning but closed at Rs 48,825 a kg on Monday.

With uncertainty in equities, real estate and other asset classes, gold has become the preferred choice for investors. Sustained increase in number of Covid cases has dented investor sentiment towards riskier assets, following the delay in global economic recovery. Traders estimate the second wave of Covid cases is yet to come despite some 200,000 cases being added everyday globally, which may call for lockdown again. This, fear many, could bring the global economy to a grinding halt. Gold and silver prices have risen by 2.6 per cent and 0.8 per cent respectively, so far this month.

”Gold prices continued to rise on Monday on heightened risk sentiments with a record spike in virus cases across the world. The warning from other officials from the United States Federal Reserves (US Fed) also supported gold prices to trade higher after they signaled longer than expected time for economic recovery,” said Tapan Patel, Senior Analyst (commodities), HDFC Securities.

The ongoing clash between India and China, coupled with the US-China trade war and scheduled election in the United States have raised uncertainty in global financial system and raised gold’s safe heaven appeal.

Gold in the London spot market traded strong on Monday at $1747 / oz after rallying above $1750 / oz in the morning trade. Gold futures at MCX for August delivery traded up by Rs 19 to Rs 47,956 limiting upside with correction in global gold prices and stronger rupee.

The rupee gained about 17 paise to trade at 76 to the greenback during the day with inflows into the equity market.

On the Multi Commodity Exchange (MCX) gold futures for delivery in August rose 0.7 per cent to Rs 48,289 per 10g. Similarly, silver futures contact for delivery in July rose by 1.2 per cent per cent on MCX to Rs 49,190 a kg.

“Gold has seen a sharp increase in investment demand over the last few weeks as bulk consumes pumped in fresh money to raise their gold holding in the yellow metal by moving away from riskier assets. Gold has become a safe bet for institutional investors with global central banks increased purchases. Gold would continue to move up to hit $1800 an oz in the international market and Rs 50,000 per 10g in Indian currency,” said Sriram Iyer, Senior Research Analyst from Reliance Securities.

Used as a safe heaven investment during times of political and financial uncertainty, gold has seen a sharp increase in investment during recent times. Indicative of the risk-averse sentiment, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund (ETF), said its holdings rose 2.03 per cent to 1,159.31 tonnes on Friday from 1,136.22 tonnes on Thursday.

Meanwhile, a report from Geojit Financial Services believes that fears of uncertain virus situation could dent pace of ongoing economic recovery which would help gold glitter amid geopolitical tensions.

“Rising gold prices have hit retail demand. Consumers are eventually hit by job losses, pay cuts and dwindling business activities due to lockdown to prevent Covid spread. Since unlock one, retail jewellery stores opened in India but, very thin activity was reported as consumers abstained from fresh purchases due to the lack of disposable income,” said Kumar Jain, Director, Umedmal Tilokchand Zaveri, a bullion dealer and jewellery retailer in Zaveri Bazaar.

Jewellers forecast that more than new gold purchase, consumers would come to jewellery stores to monetise their ornaments with some may opt to mortgage while others to go in for outright sale for the livelihood which would increase supply from domestic sources.