Why are gold stocks Titan, Kalyan Jewellers, TBZ, Rajesh Exports surging?

Amidst escalated tensions between Russia and Ukraine, and subsequent sanctions on Moscow, gold stocks have managed to grab investors’ attention as they are better positioned to hedge against rising inflation. The geopolitical tensions in Eastern Europe following the invasion of Ukraine have triggered a rally in commodity prices, with Brent crude prices hitting a 14-year high of $130 per barrel, raising inflation concerns. Adding to it, the volatility in the equities also prompted investors to shift focus to safer assets such as gold to absorb the shocks in the market.

Shares of Titan Company, Kalyan Jewellers, PC Jewellers, Rajesh Exports, Tribhovandas Bhimji Zaveri, Asian Star Co, and other gold companies were trading higher on Wednesday, gaining up to 5% on the Bombay Stock Exchange (BSE). In comparison, the BSE benchmark was trading 1,000 points or 1.9% higher at 54,434 at the time of reporting.

The stock price of Titan Company, the owner of jewellery brand Tanishq, gained as much as 2.15% to hit an intraday high of ₹2,427.45 on the BSE. The Rakesh Jhunjhunwala-backed Tata group stock gained after four consecutive sessions of fall and was trading higher than 200-day moving averages, but lower than 5-day, 20-day, 50-day, and 100-day averages.

In a similar fashion, Kalyan Jewellers rose 1.3% in intraday trade, PC Jewellers 4.1%, Rajesh Exports 5.03%, Tribhovandas Bhimji Zaveri 2%, and Asian Star Co 3.9%.

The surge in gold stocks was driven by a record rally in yellow metal prices which surged about 18% so far in the calendar year 2022 to cross $2,000 per ounce amid the Russia-Ukraine conflict. Spot gold was down 0.5% at $2,040 per ounce at the time of reporting as strong dollar and rise in US treasury yields prevented further upside in gold prices.

On Tuesday, the spot gold price gained as much as 2.6% to hit a record high of ₹2,070.29 as the turmoil in Ukraine intensified. “The prices surged on risk aversion in global markets. Market sentiments were hurt on concerns that elevated commodity prices will weigh on economic growth. Additionally, investors are scrambling to analyse the impact of Russia’s invasion of Ukraine and harsh economic sanctions against Russia,” ICICI Securities said in a report.

Given the current uptrend in gold prices, analysts at Goldman Sachs expect the prices to surge by another 25% to $2,500 per ounce by the year-end. This is a sharp revision in prices compared with previous prediction in January this year, when the agency had raised their 12-month gold price forecast to $2,150 an ounce amid a hawkish policy stance by the U.S. Federal Reserve in wake of rising inflation.