SEATTLE (Scrap Monster): The Indian central bank may be forced to sell its gold holding due to huge collapse in economic growth in the country caused by coronavirus-triggered nationwide lockdowns, which brought the country to a near standstill, said Christopher Wood, global head of equity strategy at Jefferies in his weekly report.
According to Wood, many countries across the world are being threatened by dramatic fiscal deterioration. This could potentially result in forced selling of gold reserves by many world central banks. India, with substantial gold holdings, is at risk. It must be noted that India’s official gold reserves had totalled 653 tonnes at the end of March this year. The country had been regularly adding gold to its official holdings over the past several months.
Another potential seller of gold holdings is Saudi Arabia, whose total holdings currently stand at 323 tonnes. The fiscal pressures had forced the country’s government to triple the value-added-tax (VAT) to 15%. Furthermore, the government had recently suspended cost of living expenses effective 1st June, 2020.
Wood stated that gold prices are unlikely to break the $1,800-$1,900 per Oz levels in a hurry. However, he reminded investors that the yellow metal is likely to see strong upward movement once it surpasses 2011 high of $1,921 per Oz.