Gold above Rs 50,000 per 10 grams in two years? Citi says possible

New Delhi: The rally in gold prices may not end soon. According to Citigroup Inc, gold prices may jump to more than $2,000 an ounce in the next two years as there are many positive drivers that can stoke the price of the yellow metal.

If international gold prices cross $2,000 per ounce mark then prices in India would be more than Rs 50,000 per 10 grams. One ounce is equal to 28.3495 grams. So 28.3495 grams of gold will cost around Rs 1,43,000 or 10 grams of gold will cost around Rs 50,442 assuming the dollar-rupee exchange rate remains around the current level of 71.50.

If gold prices cross $2,000 per ounce than it will be a record high for the precious metal. In 2011, gold had set a record of $1,921.17 per ounce.

Citi says lower nominal and real interest rates across the globe, recession risk and elevated trade tensions between the US and China are attracting investors to the yellow metal that is regarded as a safe haven. A Citi analyst said US Fed will ultimately end up cutting rates all the way to zero.

Worth mentioning here is that gold has already hit a six-year high in September as central banks around the globe ease policy to address the slowdown in economic growth amid trade tension between the US and China. The European Central Bank is also expected to announce more stimulus this week, while the US Fed is seen cutting rates again next week.

Citi said, for now, the US consumer and potential growth story is holding up. However, we remain more concerned about market signals — three months to 10-year yield curve inversion — and leading indicators that are weakening at the fastest pace since the Great Recession, the global bank said.

After a 16% rise this year, spot gold is hovering around $1,500. Citi said that it had upgraded its baseline forecasts for gold on the Comex by $125 to $1,575 an ounce for the fourth quarter, and by about 14% to $1,675 for 2020.

Citi’s outlook on gold came with caveats, like a hawkish turn from the Fed or a breakthrough in trade talks, although that’s not its base case. A surprise trade deal coupled with a sharp upturn in global manufacturing data would probably suggest a peak for gold at the $1,550 an ounce level for this cycle, Citi said.
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