In a surge reflective of escalating geopolitical tensions and signals from the US Federal Reserve, gold prices surged to a historic high in the international market, hitting $2,263.53 per ounce on Monday.
This spike resonated strongly in India, where the MCX gold futures for April 2024 expiry soared to an unprecedented Rs 69,487 per 10 grams in opening trade, settling at Rs 68,828 by 11:26 am.
Colin Shah, Founder and Managing Director of Kama Jewelry, attributed the rise to the US Fed's indication of an impending rate cut, noting gold's enduring appeal as a preferred asset class for central banking and safe-haven investment.
The anticipation of reduced interest rates has made traditional financial instruments less appealing to investors, prompting a shift towards gold investments and consequent price escalation. Furthermore, mounting geopolitical risks, coupled with significant gold purchases by central banks, particularly by China, have bolstered prices.
The ongoing conflicts in Central Asia and the Middle East, including the Russia-Ukraine war and the Israel-Hamas tensions spilling into the Red Sea region, have amplified uncertainties, further boosting gold's status as a haven asset.
Despite robust demand for gold in the domestic market, primarily driven by cultural practices like gifting gold during marriages, jewellers express concerns over dampened demand due to soaring prices. This sentiment is echoed by declining imports of the precious metal.
Dr Joseph Thomas, Head of Research at Emkay Wealth Management, highlighted the steady ascent of gold prices over the past six months, driven by expectations of a dovish Fed policy. He noted that the breaking of key resistance levels suggests strong momentum in the near to medium term, albeit with potential for profit-taking.