NEW DELHI/NEW YORK: Amid rising global uncertainty and fears of an economic slowdown gold lived up to its reputation as the ultimate safe-haven asset making history in international markets today. On Monday the price of spot gold crossed the psychological threshold of $3,900 per ounce for the first time hitting an all-time high of $3,924.39 in early trading. This historic rally had a direct and significant impact on Indian markets where the price of 24-carat gold also surged past the ₹1,19,000 per 10 grams mark.
Why the Record-Breaking Rally?
Several global factors are responsible for this unprecedented surge in gold prices prompting investors to seek safety:
- U.S. Government Shutdown: The ongoing government shutdown in the United States has deepened economic uncertainty leading investors to pull money from riskier assets like stocks and invest it in gold.
- Expectations of Rate Cuts: There is a strong probability that the U.S. Federal Reserve will implement further interest rate cuts this month and again in December. Lower interest rates make non-yielding assets like gold more attractive to investors.
- Heavy Buying by Central Banks: Central banks around the world particularly those in China and Russia are buying gold in large quantities to secure their foreign exchange reserves.
- Geopolitical Tensions: Rising tensions in various parts of the world including between Russia and NATO have also fueled the demand for gold as a safe-haven asset.
Impact on the Indian Market: Gold Loans in Demand as Prices Soar
The global rally has had a significant effect on India. After hitting a record high of ₹1,17,561 per 10 grams on Tuesday domestic prices climbed even higher today. Since the beginning of the year gold prices have seen a massive increase of approximately 53.5%.
Interestingly the rising prices have led to a boom in the gold loan market in India. People are choosing to mortgage their gold to meet their financial needs rather than selling it allowing them to capitalize on the higher valuation. While analysts believe the high prices might somewhat dampen the demand for jewelry during the festive and wedding seasons the demand for gold as an investment remains consistently strong.
Expert Outlook and Future Prospects
Many brokerages and analysts are bullish on this gold rally. Some experts predict that gold could even touch the $4,000 per ounce level by the end of the year. They suggest that as long as the climate of global uncertainty persists the upward trend in gold is likely to continue. Investors are being advised to maintain a “buy-on-dips” strategy.
