- By Aditya Pratap Singh
- Tue, 22 Apr 2025 03:37 PM (IST)
- Source:JND
Gold Surpasses 1 lakh Mark: Gold prices breached the Rs 1 lakh per 10 gram mark for the first time in retail markets in Delhi and Mumbai on Tuesday. The dramatic rise occurred ahead of the wedding season and the auspicious Akshay Tritiya festival, when demand for gold is usually high. According to the India Bullion and Jewellers Association, 24-carat gold was trading at Rs 1,00,000 per 10 grams on Tuesday, up Rs 3,330 from Rs 96,670 the previous day. Silver also rose to Rs 95,900 per kg.
Gold prices rose for the fourth consecutive day in the futures market. The MCX gold futures contract, which expired on June 5, rose by Rs 1,899 to Rs 99,178 per 10 grams.
What is driving the gold price rally?
Uncertainty in the global economy
Continued economic slowdowns in major economies such as the United States, China, Germany, and Japan have further exacerbated global recession concerns. Market uncertainty has been exacerbated by rising tensions between US President Donald Trump and the Federal Reserve over the US-China trade war and interest rate policy. Investors typically gravitate towards safe haven assets such as gold given all possible outcomes.
The decline of the US dollar
The U.S. dollar index fell to its lowest level in many years. When the dollar falls, demand increases because gold becomes more accessible to holders of other currencies. In line with this global trend, Comex gold was trading at around $3,395 per troy ounce on Tuesday.
Demand for safe haven
Despite the recession, sluggish economic growth, and ongoing concerns over geopolitical tensions, gold remains a popular investment. Both institutional and private investors are attracted to them because they are seen as reliable assets in volatile times.
Central bank purchases
Central banks all over the world are building up their gold reserves as a hedge against economic volatility. Emerging economies such as China, India and Turkey, with relatively lower reserves than developed countries, are driving the trend, according to a report by Tata Asset Management. The same report projects that in 2025, central banks will purchase an average of 100 tonnes of gold per month.
Should You Invest? Here's What Analysts Say
Industry analysts say gold prices may remain volatile but will remain stable in the short term.
Satish Dondapati, Fund Manager, Kotak Mahindra AMC says, "Gold prices continue their upward trend driven by persistent safe-haven buying mainly due to weakening US dollar and escalating global trade concerns. The short-term outlook on gold will remain strong if trade tension escalates between the US and China. However, long-term outlook remains bullish, supported by strong central bank purchases and geopolitical uncertainties."
Anitha Rangan from Equirus Securities sees a rally in gold prices due to reserve accumulation and geopolitical uncertainty.
"Gold rally still has more legs driven by a) Reserve accumulation, (b) geo-political uncertainty, and (c) comparison of past rallies," said Anitha.
"Gold as a % of reserves is the highest now (from 2000), and has seen a meaningful increase since 2021. While we have not had geopolitical conflicts like now in the last three decades, the peaks of 12-13% as of 2021 were seen in 2000, 2011. But since 2019, from 12%, it has climbed more than 18% by 2024. In 2011, reserve build could be a driver, but in 2000 onward, the peak which sustained was not led by reserve build," said Anitha.
Kaynat Chainwala, AVP- Commodity Research, Kotak Securities, believes Trump’s threats to remove the Fed Chair for not acting swiftly enough on rate cuts, have deepened uncertainty in financial markets, prompting a flight to safe-haven assets
"Gold extended its historic rally on Tuesday, breaking past $3,500 per ounce on the COMEX and exceeding Rs. 1,00,000 per 10 grams on the MCX, owing to sustained weakness in the U.S. dollar, which slipped to a three-year low of 97.9, amid rising tensions between President Donald Trump and Federal Reserve Chair Jerome Powell. Mounting concerns over economic instability, largely triggered by escalating tariff disputes, have further driven investors toward the safety of gold. Trump’s threats to remove the Fed Chair for not acting swiftly enough on rate cuts, have deepened uncertainty in financial markets, prompting a flight to safe-haven assets," said Kaynat.
"Gold has soared more than 30% so far this year, supported by shifting Trump trade policies and increasing fears of a potential global trade war. Significant inflows into gold-backed ETFS and ongoing purchases by central banks, coupled with persistent geopolitical and economic challenges, keep gold’s bullish momentum intact. Having said that, a brief pullback is possible considering the sharp and sustained climb this year, though the ongoing Trump-Powell feud and the progress of U.S. trade negotiations are likely to keep traders on edge and support gold prices," Kaynat added.
Disclaimer: The advice and recommendations shared in the article belong to the concerned analyst only.
