Gold prices rose by Rs 1,899 today, marking the fourth straight day of gains and propelling the yellow metal to a historic high of Rs 99,178 per 10 grams. The October futures contract on the Multi Commodity Exchange (MCX) surged by almost Rs 2,000 or 2% to an all-time high of Rs 1,00,484 per 10 grams, briefly surpassing the Rs 1 lakh mark.
Global markets have been unnerved by geopolitical uncertainty, central bank gold purchases, and President Donald Trump's criticism of the US Federal Reserve, all of which have contributed to the sharp rally in demand for safe haven assets.
"Gold has risen more than 30% this year as trade tensions have caused market jitters, increasing demand for safe haven assets, with the exception of the Dollar Index, which has fallen by more than 4% this year. Strong flows into bullion-backed exchange-traded funds, as well as continued purchases by central banks, have all contributed to the trend," said Prathamesh Mallya, DVP- Research, Non-Agri Commodities and Currencies, Angel One.
In the midst of gold's meteoric rise, Uday Kotak, founder of Kotak Mahindra Bank, used social media platform X (formerly Twitter) to praise Indian housewives for their unwavering faith in gold.
The Indian housewife is the "smartest fund manager in the world," he wrote in a post on X, adding that governments and economists pushing high deficit spending could learn a thing or two from India, "a net importer of store of value forever!" Kotak's comment came as gold reached Rs 99,170 per 10 grams in India at 10:53 a.m., according to the India Bullion Association.
"While the gold price is rising, the fall in the US dollar will make gold more affordable in other currencies, balancing demand and price dynamics. As the global economic development unfurls, we project the gold price to breach the USD 4,000/Oz in the international market during FY26. Domestically, gold prices rise slightly around festive seasons such as Akshaya Tritiya due to increased demand. The sentimental and cultural value attached to investing in yellow metal on auspicious occasions like this will keep demand strong, regardless of price trends," said Colin Shah, MD of Kama Jewelry.
Why is gold skyrocketing?
Geopolitical tensions and trade disputes
Growing trade tensions, especially between the US and China, have made markets more volatile. For instance, President Trump's criticism of Federal Reserve Chair Jerome Powell and his tariffs on Chinese goods have alarmed investors. The US dollar has depreciated as a result of these measures, and demand for gold as a safe-haven asset has surged.
Interest rate reductions and the Fed's monetary policy
Gold and other non-yielding assets have become more appealing since the Federal Reserve decided to cut interest rates. The opportunity cost of owning gold is decreased by lower interest rates, which promotes greater investment in the precious metal.
Purchases of Gold by Central Banks
The gold reserves of central banks around the world, including those in China and India, have been growing. "De-dollarization," as this trend is called, is a strategic move toward diversifying foreign exchange reserves and reducing economic risks.
Global central banks bought over 1,000 tonnes of gold in 2024 for the third consecutive year. Notably, Value Research estimates that the change in Chinese policy permitting insurers to invest up to 1% of their assets in gold could raise yearly demand by about 255 tonnes.
"The freezing of Russian central bank assets made countries realise that dollar reserves carry political risk. In response, central banks increased their gold purchases. This isn't just speculation; it indicates deeper changes in the global monetary system," said Dhirendra Kumar of Value Research.
