The simmering geopolitical tension in West Asia has pushed up gold prices close to a record high in the domestic market on the back of its haven appeal. The yellow metal gained ₹100 in the spot market on Thursday at ₹75,615 per 10 grams against ₹75,515 on Tuesday, according to data from the Indian Bullion and Jewellers Association of India.
Though gold prices in the US market hit a new high, the sharp recovery in the dollar against major currencies limited gain in large gold consuming countries like India.
Gold prices in the US was, however, off the record high of $2,685 an ounce at $2,648.49 an ounce. The possibility of another interest rate cut by the US Fed is exerted further upward pressure on the yellow metal. In MCX, gold futures for December delivery was down by ₹333 at ₹76,390 per 10 grams on Thursday.
Weak rupee
Amid escalation in the Israel-Iran war, investors are now shifting their focus towards US economic data and the Federal Reserve’s policy decisions. The conflict is serious, with Israel retaliating against an Iranian attack by bombing central Beirut. This has heightened fears of a larger regional war, yet gold has struggled to fully benefit from the usual “risk-off” environment.
Hareesh V, Head of Commodities, Geojit Financial Services, said gold prices are hovering near lifetime highs on worries over escalating Middle East tensions which raised the haven demand for the commodity. “A possible increase in jewellery demand amid peak festival season and a weak Indian rupee also aided the commodity in the domestic market. Meanwhile, a sharp recovery in the US dollar limited major gains,” he added.
Prathamesh Mallya, DVP-Research, Non-Agri Commodities and Currencies, Angel One, said despite the increasing risks of the Israel-Iran conflict turning into a wider regional war, gold prices are struggling to capitalise on the risk-off flows as the odds of a 50-basis point interest rate cut by the US Fed in November have decreased, keeping the dollar strong at the expense of gold.
Meanwhile, Goldman Sachs has predicted gold to extend its record-setting rally to new highs by early 2025.
Other factors
Aside from rising geopolitical tensions, which tend to favour safe-haven assets such as gold, the other two factors supporting the gold rally include the fall in US interest rates and insatiable demand for the precious metal from central banks in emerging market countries.
Goldman boosted its gold price target to $2,900 per troy ounce from $2,700, representing upside of about 9 per cent from current levels. Such gains would come after gold prices have already rallied 29 per cent year-to-date.