Gold prices are once again experiencing a significant surge. On Monday, gold on the Multi Commodity Exchange (MCX) reached an all-time high of ₹1,01,210 per 10 grams. This price pertains to the August futures contract. In the international market, gold traded at $3,430 per ounce on COMEX.
Several international factors are cited as reasons for the recent surge. Weak economic data released in the United States has increased expectations of interest rate cuts by the Federal Reserve. Additionally, new tariffs imposed by US President Donald Trump have driven investors towards gold, leading to a continuous rise in prices.
Prices May Rise Further Until Diwali
According to Ria Singh, an analyst at financial research agency MK Global Financial Services, gold and silver prices in India are likely to rise further in the coming months, particularly around Diwali. In a report, she stated that global political and economic uncertainties are causing investors to turn to safe-haven investments, directly impacting gold.
According to Ria Singh, gold could reach between ₹1,10,000 and ₹1,12,000 per 10 grams around Diwali, while silver is expected to reach ₹1,20,000 to ₹1,25,000 per kg.
Likely Impact on Festive Demand
Traditionally, gold and silver are heavily purchased in India during festivals like Diwali and Dhanteras. However, due to the high prices this time, there may be a decrease in jewelry demand. Middle-class buyers, in particular, may be cautious due to the high prices.
However, customer interest in 9-carat and lightweight jewelry may increase. Recent changes in hallmarking by the government have led to a shift towards lighter but stylish jewelry.
Heavy Buying by Central Banks
In the past few years, central banks worldwide have been buying gold heavily. Countries like Turkey, Kazakhstan, India, and Russia have increased the share of gold in their foreign exchange reserves. This has created an environment of sustained growth in gold prices.
Due to the real estate crisis in China, investors there have started investing in Gold ETFs and physical gold instead of real estate. This has also increased the demand for gold in the international market.
Why are Gold Prices Rising?
Gold prices have seen a tremendous surge in the last few years. Since 2019, gold prices have increased by approximately 200 percent in about six years. This is due to several reasons, including geopolitical tensions worldwide, post-pandemic uncertainties, and heavy buying by central banks.
Following the start of the war between Russia and Ukraine in 2022, the United States and European countries imposed sanctions on Russian assets. As a result, many countries started accumulating gold instead of dollar-based reserves, viewing it as a safe and strategic asset.
Gold Buying Now Part of Investment
While gold was previously purchased mainly as jewelry in India, people are now starting to see it as an investment as well. With options like Gold ETFs, Sovereign Gold Bonds, and Digital Gold, people are now adopting gold as a long-term investment. This keeps demand consistent, no matter how high the prices may be.
Gold prices are entirely dependent on global economic indicators and political stability. The Federal Reserve's next meeting regarding interest rates in the United States, China's economic situation, and ongoing economic policies in Europe will determine the direction of these prices.
