The precious metals market witnessed a historic moment on September 26, 2024, as gold futures surpassed the $2700 per ounce mark for the first time. Right from the month of August, until October, gold rallied and in just wo months it reached from $2400 to over $2700- a significant jump of 12.70%.
Several factors have contributed to gold’s extraordinary performance.
- Federal Reserve’s monetary policy, implemented to combat inflationary pressures that peaked at over 9%.
- The central bank’s interest rate decisions have significantly influenced gold prices, as investors often turn to the precious metal as a hedge against inflation and currency devaluation.
- Geopolitical tensions have also played a crucial role in driving gold prices to new heights. The ongoing conflict following Russia’s invasion of Ukraine has created global economic uncertainty, prompting investors to seek safe-haven assets like gold.
- More recently, the outbreak of war in the Middle East has further fuelled this trend, underscoring gold’s status as a store of value during times of international crisis.
What sets the most recent leg of the rally apart is its sustained momentum. Since August, as per live gold price, gold has moved substantially higher without any notable corrections—until now. The breach of the $2700 mark seems to have triggered a long-awaited pullback, marking the first defined correction since the rally began in August.
There are enough economic, political, and security uncertainties in the world to drive gold and silver to new heights in the next six months regardless of inflation, interest rates etc.
And these uncertainties will drive gold and silver to new highs. Not forgetting one of the most important events of the year – The US Presidential Elections. This could be a turning point in the rally,
Gold now faces an interesting balance of upside and downside risks as well. If the Fed now turns more cautious instead of maintaining a steady course on rates, then it could create some pressure on gold. But parallel to this we have geopolitical risks adding uncertainty to the broader market, which will provide support to precious metals, this limiting their downside trend.
Currently, expectations of further rate cuts by the US Fed in the coming months and geopolitical tensions are the two key factors supporting gold prices.
Amid interest rate cuts in the US and global instability, gold and silver have reached new highs. Tensions have increased in the Gulf countries amid the already ongoing Russia-Ukraine war. Central banks of many countries including India and China are buying gold. Due to global unrest, big investors are also increasing their investment in gold and silver.
In the domestic market too, gold and silver have seen rising demand with the onset of the festive season. As per bullion dealers in India, the period between Dhanteras to Diwali, sees a sale of almost 20-25 tonnes of gold every year. One of the main reasons for this, apart from the festive sentiments, is the safe haven appeal of the yellow metal. The price of gold has risen at the international level. Investment in gold has given more than 35% returns this year. Hence investors are buying gold as a safe haven asset. As per gold dealers in India, daily 700-800 tonnes of gold is imported in India. Out of this 60-65% of gold is used in making jewellery. 15-20% is used in making coins and around 5% is sold in ETF-Digital. Investment in gold has seen significant increase. When the price is low, people book gold and take delivery on special muhurat. While the older generation like to tock physical gold, the younger lot prefers to invest in digital gold and ETF.
One more reason for this rising demand is the easy availability of coins and jewellery. You can buy gold from any corner of the country; big companies are also increasing their penetration in retail jewellery business. Hence the rising demand is being met by a string supply chain, thus making it more accessible.
Despite the shocks of fluctuations, the prices of both the precious metals are going up, as per gold price today. The Indian economy is getting strengthened by agriculture and other industrial sectors. As a result, the demand for jewellery and coins for Dhanteras-Diwali is good. After a strong sale this Dhanteras, we are expecting rising demand during Diwali too.
Meanwhile, gold and silver prices face a wide range of uncertainties in the near future. International political ones, regional wars, Ukraine, Middle East, national political issues, economic trends, financial market stability- the list of key events is long and this will definitely bring about significant volatility in the markets – momentum of which can be higher than what we have already witnessed.