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International Journal of Research and Review
Vol.8; Issue: 3; March 2021
Website: www.ijrrjournal.com
Review Paper E-ISSN: 2349-9788; P-ISSN: 2454-2237
Impact of Corona on Gold Rates
Seema Mridha
Assistant Professor, G.S. College of Commerce and Economics, Nagpur
ABSTRACT considered a safest mode of investment not
only for the big investors but also for the
The corona pandemic has impacted each and households. India is the second largest gold
every sphere of human life. Its impact on consumer after China. The yellow metal
investment decisions can also be felt. For long saw various ups and downs in the corona
term benefit and risk-free investment, gold is
pandemic period which crossed Rs. 50000
always considered as a safe zone. Even small
investors such as household prefer it rather per 10 grams and made a history despite
investing somewhere else. With the beginning severe economic crises and recession in the
of the pandemic, when the whole nation went economy. Through this study we will come
into complete lockdown, many investors and to know how pandemic can pose a positive
institutional investors especially from Europe impact on yellow metal. There are many
and America invested huge capital in Gold reasons in investing in gold. It is simple and
backed ETFs. As per the World Gold Council easy to convert into cash. It was seen
review, after China, India is the second largest during the pandemic period that many
consumer of gold but the demand for them people sold their gold to meet out the
reduced drastically during these challenging financial crisis because many people lost
times. But the price for gold reached a historic
their job. Return rates of physical gold are
high at Rs.53,250 per 10 gram. Gold backed
ETFs and similar products (gold ETFs) had a also never too profitable if we invest in the
remarkable year in 2020. Data from World Gold gold jewellery because the price of the
Council, Bloomberg was studied Globally, gold jewellery also includes the making charges.
ETFs had record annual net inflows of So many people instead of buying physical
US$47.9bn or 877 tonnes. Gold rose 25% gold invest in gold ETF. In the 1st quarter
during 2020, hitting a historical high of the rate of gold rose extremely high. It is
US$2067.15/oz on August. It was found that also being noticed that how the prices of
when economy was worst affected, production various stocks impacted the purchase of
stopped, many people lost job, share prices gold ETFs. In the pandemic period India’s
crashed, gold became very lucrative and showed GDP fell drastically, reached negative
how its rate is inversely related with the
digits, investors searched for safe haven.
economic growth.
Gold is scarce is nature, that’s why India
Keywords: - Gold rates, corona pandemic, ETF imports maximum gold it requires. Even
(Exchange Traded Fund) though with reduced demand the prices of
gold were skyrocketing. In India, the gold
INTRODUCTION rates are determined by Indian Bullion and
The year 2020 was full of challenges Jewellers Association which provides daily
which posed a great difficulty for the whole price which is based on:
nation. Even the investors were not spared. a) International prices
The whole nation went into complete b) The dollar-rupee exchange rate
lockdown from March end 2020. Investors c) Taxes and profit margin
who are the speculators always seek to gain As per World Gold Council sources
more profit either investing in Mutual funds, there was a record gold backed ETF inflows
real estate, shares or gold. Gold is always of 877t in 2020 took holdings to all time
International Journal of Research and Review (ijrrjournal.com) 731
Vol.8; Issue: 3; March 2021
Seema Mridha. Impact of corona on gold rates.
highs reaching holding of 3751.5 tonnes and VAT but now after the implementation of
also the gold demand in India in CY20 GST the gold tax rate is 3%.
stands at 252 tonnes, as compared to 496 Gnanadurai Pandithurai (2016)
tonnes in the same period last year. WGC revealed that a comprehensive and simple
data shows the demand for gold in Q3CY20 framework can provide the investor with
stood at 86.6 tonnes, down 30% as detailed information about the gold and it
compared to the same period in 2019 at will ensure a proper expectation on gold and
123.9 tonnes. Gold demand value stood at its role in a portfolio. The study also shows
Rs 39510 crore during the period under that there exists a close relationship between
review, down 4% as compared Rs.41300 dollar price and the gold price. The study is
crore in Q3-2019. Gold demand for about predicting the future price of gold and
jewellery at the global level also dropped to informing the investor about the impact of
29% year on year to 333 tonnes in Q3CY20. numerous factors that can affect the
In the year 2020, the global demand for gold performance of gold in different economic
came to 14% lower at 3759 tonnes, WGC environments.
said that the fall is due to the coronavirus Nishit K. Dave (2016) showed us
pandemic which weakened the consumer that gold can act as a better portfolio
demand. Since 2009 the global demand for unpredictability and minimize losses amid
the yellow metal on an annual basis slipped times of business sector fluctuations. When
below the 4,000tonnes. The annual global other assets are not performing well, gold
demand India also witnessed a massive fall can serve as a high quality, liquid resource.
of 48% year on year to 52.8tonnes, as per It also disclosed that there are positive
WGC data. It was also found that in India correlations among gold prices and crude oil
and China many people invest in physical prices together with all the other key
gold, but in U.S. and Europe they invest in elements.
ETF (exchange traded funds). Demand Shaun K. Roache and Macro Rossi
from western countries has increased a lot. (2009) examined that commodities tend to
be less sensitive than financial assets – e.g.,
LITERATURE REVIEW crude oil, the most actively traded
Dr. Puja Archana Sahu (2020) commodity futures contract, shows no
studies the impact of inflation on consumer significant responsiveness to almost all
behavior towards gold. According to them, announcements. The gold price is sensitive
gold investment should be encouraged being to several scheduled U.S. and Euro are
a easily approachable investment, when the macroeconomic announcements –including
prices of real estate market are increasing. retail sales, nonfarm payrolls and inflation.
Inflation has put a negative impact on the According to them, Gold’s high sensitivity
gold investment also its an accessory and to real interest rates and its unique role as a
shows social status. safe haven and store of value typically leads
Sowjanya A.M. (2020) observed to a counter cyclical reaction to surprise
that the implementation of GST made a news, in contrast to their commodities.
positive impact on the gold sector.
Implementation of GST has put gold market RESEARCH METHODOLOGY
more transparent which led to reduction in Secondary data was used from
the corruption. Customers feel GST as a published resources such as from
extra burden on them, but it will lead to a newspapers, data used from World Gold
corruption free economy. Though GST has Council, and other published magazines.
increased the price of the gold. Before the Explanatory research methodology was
implementation of GST, the gold tax rate used. A deep analysis was done on the
was 2%i.e., 1% for service tax and 1% for research findings and the causes of ups and
downs were observed.
International Journal of Research and Review (ijrrjournal.com) 732
Vol.8; Issue: 3; March 2021
Seema Mridha. Impact of corona on gold rates.
Source :World Gold Council
Gold backed ETF and similar change in holdings by month
International Journal of Research and Review (ijrrjournal.com) 733
Vol.8; Issue: 3; March 2021Seema Mridha. Impact of corona on gold rates.
Gold backed ETF and similar change in holdings by year
International Journal of Research and Review (ijrrjournal.com) 734
Vol.8; Issue: 3; March 2021Seema Mridha. Impact of corona on gold rates.
RESULTS North American funds had inflows
The above figures shows that despite of 563t(US$31.9bn, 45%AUM). Holdings
record setting inflows in the first 10 months in European funds grew by 260t
of 2020 inflows turned negative in (US$13.3bn, 21%). It is also seen from the
November and December. North American above data that funds listed in Asia saw
funds represented nearly 2/3 of global net holdings rose by 38t(US$1.9bn,49%).
inflows in 2020. The above data shows that Other regions had inflows of
Gold backed ETFs and similar products 16t(US$899mn, 41%). Despite dropping
(gold ETFs) had a remarkable year in 2020. 12% in march, when markets were rocked
Globally, gold ETFs had record by the onset of the COVID-19 pandemic,
annual net inflows of US$47.9bn or 877 gold recovered to finish the year among the
tonnes. Gold rose 25 % during 2020, hitting best- performing assets.
a historical high of US$2067.15/oz on Gold demand in India was 446.4
August. tonnes in 2020, as compared with 690.4
tonnes in 2019 due to the corona which put
International Journal of Research and Review (ijrrjournal.com) 735
Vol.8; Issue: 3; March 2021Seema Mridha. Impact of corona on gold rates.
lockdown and also because of high prices. observed that investors found gold as the
Also total jewellery demand in India was most lucrative investment and started selling
down by 42% at 315.9 tonnes when them when price of gold was utmost high.
compared with 544.6 tonnes in 2019.
Total annual gold supply was also REFERENCES
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CONCLUSIONS 3. Gnanadurai Pandithurai (2016), “ Astudy of
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and America, to safeguard their money gold-demand
invested in Gold ETFs hugely, as it is
always considered a safe haven, which How to cite this article: Mridha S. Impact of
resulted in the rise in the price of gold. corona on gold rates. International Journal of
Though demand for physical gold in India, Research and Review. 2021; 8(3): 731-736.
reduced by more than 90%. It is also
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International Journal of Research and Review (ijrrjournal.com) 736
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