Gold prices rose by Rs 250 yesterday to a record high of Rs 78,900 per 10 grams, compared to the previous close of Rs 78,650 per 10 grams.
According to market analysts, this steady rise in gold prices could be attributed to a combination of factors, including geopolitical tensions, changes in interest rates, and robust demand from key markets like India.
The current global environment, marked by uncertainty due to events such as Iran's attack on Israel, contributed to a rise in gold prices, with investors seeking safe-haven assets. While these tensions typically push prices higher, a strong US Dollar—bolstered by the Federal Reserve's careful approach to interest rate cuts—kept gold's upward momentum in check, preventing even larger gains.
Experts pointed out that India's import-duty cut from 15 per cent in India to 6 per cent led to a significant surge in gold imports, which more than tripled to 140 tons in August this year. This boost in supply, coupled with strong seasonal demand during festivals like Diwali and Dussehra and the wedding season, is expected to keep domestic gold prices high.
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"Weddings alone account for nearly half of India's gold consumption, and with disposable incomes rising, especially among farmers after a favourable monsoon season, demand for jewellery remains robust. Looking ahead, while gold may see some short-term fluctuations due to global market volatility, the broader outlook remains positive. Continued geopolitical tensions and uncertainty in the financial markets are likely to support gold's position as a safe-haven asset. Furthermore, with India entering its peak gold-buying season and urbanization trends boosting long-term jewellery demand, prices could remain elevated. However, the strength of the US dollar and global interest rate trends will be key factors in determining how much further gold can rise in the near future," Alex Volkov, market analyst at VT Markets, told THE WEEK.
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Gold held on to minor gains in the background of the Israeli conflict and the shift in global monetary policy, with major central banks embarking on rate cuts. Analysts observed that with the tight presidential race between Donald Trump and Kamala Harris in the US added to the mix, markets are becoming risk-averse on the margin. All these factors rekindled gold's attractiveness as a safe-haven asset.
Although China paused its gold purchases in the second quarter, it showed no signs of selling reserves in the following months while other central banks continued to accumulate, including our own.
"The USD 2,550 per ounce level is a pivotal point for potential pullbacks. Should prices revisit this level, traders might find buying opportunities for mid-term bullish positions. These support levels are expected to continue to hold, especially as the fourth quarter presents a perfect geopolitical recipe for gold's performance," pointed out Sandip Raichura, executive director and CEO (Broking and Distribution) at Prabhudas Lilladher Pvt Ltd.
"The risk is that technical indications suggest gold prices are being significantly overbought with both the weekly and monthly Relative Strength Index (RSI) lodged above 80 levels or thereabouts—history has shown that these RSI levels result in a sharp turn in gold prices. Despite this history, though, we remain bullish with a stop placed at around 2,602 levels. The movement in the US Dollar Index (DXY), which has climbed up in the last week, remains a critical sign of the times to come for precious metals—a rise here is negative for gold," added Raichura.
Jewellers suggested that the new high of gold prices in the domestic market was majorly fuelled by the robust festive demand from jewellers and traders ahead of Dhanteras and Diwali. Gold holds a sentimental and cultural value in India, and buying gold is considered auspicious during festivals, especially during the festive season.
"Since the festive season has already begun, in terms of prices, we expect upward mobility to continue, albeit at a slower pace and with bouts of volatility. Globally, the geopolitical tensions and continuous reduction in interest rates will likely push gold prices higher. We expect the domestic gold prices to touch levels of 80,000 in the medium to long term. Whereas, globally, the rates are expected to attain levels of USD 2,900 to 3,000," said Colin Shah, founder and MD of Kama Jewelry.
