There is a growing risk of liquidation of gold in India caused by a lockdown-triggered collapse in economic growth, wrote Christopher Wood, global head of equity strategy at Jefferies.
The potential for forced selling in gold, Wood believes, could come from central banks given the dramatic fiscal deterioration being suffered by many countries. India, he said, is at risk given its substantial gold holdings.
“Another potential seller is Saudi Arabia where fiscal pressures caused a draconian threefold increase in the value-added tax (VAT) rate to 15 percent and the suspension of cost of living allowances,” Wood said.
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