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Gold prices surged to a new all-time high of $2,263.53 per ounce in the global market on Monday amidst escalating geopolitical tensions in Central Asia and signals from the US Federal Reserve indicating a potential rate cut. Reflecting this rally, the MCX gold price in India, for the Gold Futures contract expiring in April 2024, skyrocketed to a record Rs 69,487 per 10 grams during opening trade, maintaining at Rs 68,828 by 11:26 am.
Colin Shah, Founder and Managing Director of Kama Jewelry, attributed the surge in gold prices to the US Federal Reserve’s indication of a rate cut, noting gold’s perennial allure as a favored asset class for central banks and a safe-haven investment avenue.
Anticipations of diminished interest rates render financial instruments less appealing to investors compared to gold, thus propelling increased acquisition of the precious metal and subsequent price hikes.
Geopolitical uncertainties, coupled with central bank acquisitions, notably by China, have further fueled the surge in gold prices. With ongoing conflicts like the Russia-Ukraine war and the expansion of the Israel-Hamas conflict into the Red Sea region, investors perceive gold as an attractive sanctuary amidst geopolitical instability.
In the domestic market, the demand for gold is buoyed by its significance in traditional ceremonies, particularly weddings, where it is exchanged in substantial quantities as jewelry. However, jewelers express concerns that soaring gold prices may dampen this demand, a sentiment echoed by declining imports of the precious metal.
Dr. Joseph Thomas, Head of Research at Emkay Wealth Management, remarked on the steady ascent of gold prices over the past six months, driven by expectations of a dovish Federal Reserve policy. The decline in interest rates bodes well for gold prices, with breakthroughs in key long-term resistance levels indicating sustained momentum in the near to medium term, albeit with potential for profit-taking.
