Gold prices witnessed a surge for the fourth consecutive day, reaching a near two-month high.
Geopolitical tensions have once again intensified in the Middle East. The escalating conflict between Iran and Israel has destabilized global markets. This instability has driven investors back towards gold. On Monday, gold prices climbed for the fourth consecutive day, reaching a two-month high. Demand is significantly increasing in both international and domestic markets.
Geopolitical Tensions Support Gold Prices
Rising tensions between two major global powers have instilled a sense of insecurity among global investors. This has led them to increase investments in traditional safe-haven assets like gold to protect their capital. This is the primary reason behind the recent surge in gold prices. On Monday, spot gold in the international market rose 0.3 percent to $3442.09 per ounce, its highest level since April 22nd.
Gold prices also strengthened in the US futures market, reaching $3461.90 per ounce. Experts believe that if the situation worsens, gold could surpass the $3500 level, reflecting the persistent uncertainty among investors.
MCX Also Witnesses an Upward Trend
India's Multi Commodity Exchange (MCX) also saw a rise in gold prices on Monday. August delivery gold was trading at ₹1,00,406 per 10 grams at 9:32 AM, up 0.13 percent. This marked the fourth consecutive day of price increases.
Increased Demand for Safe-Haven Investments
Gold is traditionally considered a safe-haven investment. During times of global crisis, whether economic or political, investors turn to gold to protect their capital. This is the current situation. Experts state that the global risk premium has increased, directly impacting gold demand.
Impact of US Monetary Policy
Investors are closely monitoring the upcoming monetary policy meeting of the US Federal Reserve. It is expected that the Fed will maintain its key interest rate between 4.25 and 4.50 percent. Investors also anticipate a potential 0.25 percent interest rate cut by September. If this happens, it would provide further support to gold prices.
Why Gold Prices Rise
Several factors contribute to gold price increases. A major factor is geopolitical instability. When conflict or tension arises in a region, people invest in gold to mitigate risk. Another factor is economic uncertainty. When recessionary fears emerge or inflation rises, gold becomes a preferred option.
Furthermore, interest rates and the strength or weakness of the dollar also play a role. When the dollar weakens, gold becomes more expensive, while a b dollar limits gold price increases. Gold is a non-yielding asset; therefore, when interest rates are low, the demand for gold increases.
Implications for Domestic Investors
Indian investors are increasingly turning to gold. Gold has traditionally been a preferred investment choice for Indians, but interest is now growing in financial instruments like Gold ETFs, Sovereign Gold Bonds, and digital gold. Given the current geopolitical situation and global market trends, this time period has become significant in terms of safe investments.
Experts suggest that gold could be a b option for investors seeking to avoid short-term risk. However, maintaining a balanced portfolio is essential for long-term investments.
