Safe bet: Five reasons that will lead gold to all-time high price

Indian households supposedly hold 25,000 tonnes of gold valued at Rs.121.5 trillion, or almost 60 per cent of India's GDP.

Gold price hit $1800 in New York's Comex Futures and appear headed for an all-time high level of $1900 in the international market, lifted by investors seeking a safe bet as the world battles coronavirus pandemic .

In India, prices calculated with 3 per cent Goods and Service Tax (GST) crossed Rs. 50,000 per 10-gram mark. Silver in Futures on MCX is trading at Rs 50,300 (without GST). In 2011, gold reached above $1900 and then fell sharply to consolidate at lower levels for years after falling to near $1,000. Gold usually has a price cycle of 8-10 years and after consolidating for years it has entered a bull cycle.

“Gold continues to have plenty of upside from current levels. We expect prices to come close to the 2011 peak of $1,921, although that level may not be breached this year," said Metal Focus, a London-based bullion and metal research firm.

"This may not to be a straight line rally and there will be periods of liquidations which will potentially take it to levels as low as $1,600. Investors should buy at such. That will make such dips short lived. Overall, we forecast the gold price will average $1,700 in 2020, up 22% year-on-year,” said Metal Focus.

Gold averaged $1,647 per ounce in 2020. The price rally this year has made Indian investors holding gold for the last 12 months richer by Rs 36.5 trillion. In the last 12 months, gold price in India has increased by 43 per cent to trade in the physical market at around Rs 48,600 per 10 gram. Indian households supposedly hold 25,000 tonnes of gold valued at Rs.121.5 trillion, or almost 60 per cent of India’s GDP.

Covid-19: Investors bullish on US stocks, but doubt looms despite rally

After a slump into bear market territory, the Dow Jones Industrial Average surged over 20% from its recent low last week, which by one definition suggested a new bull market.

After a brutal meltdown, some investors have been wading back into U.S. stocks. But others are wary of another leg down as the coronavirus spreads and its economic impact is difficult to predict.

High-profile investors from BlackRock Inc to billionaire William Ackman have turned more bullish on equities in recent days, as unprecedented stimulus from the Federal Reserve, a $2.2 trillion stimulus bill signed Friday, and a call by President Donald Trump to get the United States back to work in weeks rather than months sparked the biggest weekly rally in the Dow Jones Industrial Average since 1938.

But other investors, economists, and strategists are fearful of advising a jump back in, with no certainty about when the coronavirus outbreak will be under control.

"People are trying to time the bottom and that's indicative of an early bear market, when people have hope," said Richard Bernstein, chief executive officer of Richard Bernstein Advisors. "The beginning of a bull market starts with complete despair, when you've killed hope."

Bernstein said he was a "data hawk" and was looking for a combination of "improving fundamentals" - eyeing the basic health of the asset, rather than trading patterns - and "total disbelief," adding that in 2009 investors did not believe the bull market was real.

After a slump into bear market territory, the Dow Jones Industrial Average surged over 20% from its recent low last week, which by one definition suggested a new bull market. That definition, however, should be treated with significant caution.

BofA said on Friday that its Bull & Bear Indicator - a key market measure used to track positioning - had hit "maximum bearish," which could imply a rebound. However, that could have been borne out by the rally seen in the past week.

Ackman, whose Pershing Square LP fund gained a net 6.8% this month according to one investor, wrote to investors last week to say he had taken off credit market hedges and invested the money in new and existing stock holdings after turning "increasingly positive" on stock and credit markets.

RBI follows global banks, cuts repo rate by 75 bps to fight coronavirus

The move comes after the global central banks have been cutting rates to help shore up the economy amid coronavirus pandemic.

Following in the footsteps of global central banks, the Reserve Bank of India (RBI) on Friday lowered the key repo rate by 75 basis points (bps) to 4.4 per cent, to help arrest the economic slowdown in the wake of the coronavirus (Covid-19) outbreak. The reverse repo rate now stands at 4 per cent, down 90 bps.

Repo rate is the rate at which a country’s central bank lends money to commercial banks, and reverse repo rate is the rate at which it borrows from them.

MPC voted 4-2 in favour of the reduction of the repo rate by 75 bps, RBI Governor Shaktikanta Das said in an address to media. The governor informed that the members of the MPC met on March 24, 26, and 27.

"It is our effort to ensure normal functioning of the market," Das said. The governor further said that the economic growth and inflation projection would be highly contingent depending on the duration, spread and intensity of the pandemic. "Need of the hour is to shield the economy from the pandemic," Das added.

Meanwhile, liquidity adjustment facility (LAF) has been reduced by 90 bps to 4 per cent while cash reserve ratio (CRR) has been slashed by 100 bps to 3 per cent.

In an order to mitigate the burden of debt servicing brought about by disruptions on account of Covid-19 pandemic, the central bank announced measures that included moratorium on term loans; deferring interest payments on working capital; easing of working capital financing; deferment of implementation of the net stable funding ratio; and the last tranche of the capital conservation buffer.

"All commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) (“lending institutions”) are being permitted to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1, 2020," the statement added.