Gold hits fresh record high to ₹78,900 per 10 grams; What’s driving the rally?

Gold prices reached a new all-time high of ₹78,900 per 10 grams in the national capital on Wednesday, rising by ₹250 due to continued demand from jewellers, as reported by the All India Sarafa Association. The precious metal had settled at ₹78,650 per 10 grams in the previous session on Tuesday.

Similarly, silver saw a sharp increase, climbing by ₹1,000 to ₹93,500 per kilogram due to fresh purchases from industrial units and coin manufacturers. On Tuesday, it had closed at ₹92,500 per kilogram.

Gold with 99.5% purity surged by ₹250, reaching a new record high of ₹78,500 per 10 grams, compared to the previous close of ₹78,250 per 10 grams.

Traders attributed the increase in gold prices to strong demand from local jewellers, while a slump in equity markets also supported the rally as investors shifted towards safe-haven assets like gold.

On the Multi Commodity Exchange (MCX), gold futures for December delivery rose by ₹268, or 0.35%, to ₹76,628 per 10 grams.

Meanwhile, silver futures for December delivery jumped ₹580, or 0.63%, to ₹92,203 per kg on the exchange.

“Gold prices stayed elevated with gains of ₹350 in MCX, while Comex gold traded above $2,675, up 0.55%. Traders continue to position themselves on expectations that the Federal Reserve will maintain its path of interest rate cuts. This has sustained bullish sentiment around the yellow metal, which reached record highs in September. Since then, gold has been consolidating in the low-to-mid $2,600 per ounce range, as traders anticipate a slower pace of rate cuts from the Fed,” said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

Gold prices in global markets

Commodity experts suggest that lower anticipated interest rates are favorable for gold prices, as they lessen the opportunity cost of holding the non-yielding asset.

Gold also finds strong support from heightened geopolitical tensions and the uncertainty surrounding the upcoming US Presidential elections.

While Federal Reserve officials are divided on the number of rate cuts expected by year-end, the US central bank is still on course for further policy easing. Markets are waiting for upcoming economic data to gain a clearer understanding of the Fed's rate-cut plans, the experts noted.

Silver was up 0.91%, trading at USD 32.05 per ounce during Asian market hours.

This week's focus will be on US Retail Sales, Industrial Production (IIP), and China’s GDP data, which are expected to provide insights into the direction of bullion prices in the near term, Modi added.

Trivedia further added, "The geopolitical situation in the Middle East has further bolstered safe-haven demand for gold, adding to its upward momentum. Despite the consolidation, gold is finding solid support between ₹76,000- ₹76,200 in MCX, while resistance is expected in the ₹76,900- ₹77,100 range. As long as the Federal Reserve's dovish tone and geopolitical risks remain, gold is likely to continue trading with a positive bias."

(With inputs from PTI)