Driven by rising demand and global macroeconomic factors, gold prices in Delhi this week touched a life-time high of Rs 81,000 per 10 grams, while silver crossed Rs 1 lakh per kg.
If festive season sales are driving the demand for gold, silver prices are witnessing a global surge, thanks to rising industrial demand. In all, the price of the yellow metal has shot up over 33 per cent in the past 10 months to over USD 2,750 per ounce in October.
For both the metals, the demand outlook appears bright owing to global macroeconomic uncertainties, geopolitical tensions in West Asia, the slowdown in China and anticipated interest rate cuts by global central banks. All these factors will likely influence gold’s movement upwards, with analysts pegging prices as high as USD 3,000 in 2025.
Thankfully, gold price increases this year seem to be somewhat well-behaved amid economic and financial market uncertainties, rising bond yields and a firmer dollar, which has been reigning steady – a further appreciation could temper a gold price rally.
Similarly, US bond yields are firming up, with the price-sensitive 10-year yield touching fresh highs. But despite these pressures, gold remains relatively supported and isn’t breaking into a manic run up to USD 3,000.
Ultimately, central bank actions and consumer demand will determine the yellow metal’s price movements from here on. When interest rates on financial instruments fall, investors turn to gold as it offers better returns, and when rates rise, they retreat. Clearly, expectations of a US Federal Reserve rate cut this year and the next is adding to the bullish sentiment in the gold market.
Moreover, given the global geopolitical landscape and economic uncertainties, gold continues to serve as a safe-haven asset. It’s a time-tested and sought-after investment instrument, given its role as a hedge against inflation, especially during periods of high inflation, slowdown or recession.
But for countries like India, which is the world’s largest gold importer, any increase in price puts a pressure on the import bill and, in turn, affects the overall trade balance. Besides rising gold prices can also reflect expectations of higher inflation, which can further impact interest rates and growth. Investors should be cautious and watch for key economic data that may trigger market volatility.