Gold, silver prices jump over 4% in October on safe-haven demand, 3rd straight month of gains

Precious metals continued their upward momentum in October, marking a third consecutive month of gains, with gold and silver rising 4.21% and 4.56%, respectively. This surge has been largely driven by heightened geo-political tensions, fueling ongoing demand for these safe-haven assets.

The monthly returns could have been even higher if not for a sharp correction during the last trading session of October, with gold and silver falling up to 3%. This decline was influenced by robust US economic data, which heightened expectations that the US central bank may adopt a more cautious stance regarding rate cuts in the coming months.

Apart from the rising tensions in the Middle East, the political uncertainty in the US is also supporting gold prices, as the possibility of another Trump presidency has heightened expectations for expansionary fiscal policies and increased tariffs. This scenario is prompting investors to turn to gold as a safeguard against long-term inflation risks.

Against this backdrop, US spot gold prices surged from $2,656 per ounce to $2,749 in October, reaching a record high of $2,790 per ounce. As a result, bullion is on track for its best annual performance since 1979, with year-to-date gains already at an impressive 33.30%.

On the Multi Commodity Exchange (MCX), gold prices rose from ₹75,535 to ₹78,430 per 10 grams over the month, reaching a fresh record high of ₹79,775 on Thursday, October 31. Reports indicate gold demand will likely surge this week amid festival purchases for Diwali and Dhanteras, although volumes might be tempered due to record-high prices.

Jateen Trivedi, VP and Research Analyst in Commodity and Currency at LKP Securities, noted, “Currently trading around ₹79,400 on MCX, gold faces resistance at ₹79,600, while on Comex, it encounters a hurdle near $2,790. The upcoming U.S. election next week is expected to play a decisive role in gold’s trend, with market participants watching its outcome closely for further direction.”

Meanwhile, Spot US silver prices in October rose significantly, reaching $31.24 from $32.66 per kilo and marking a 12-year peak at $34.86. In the domestic market, silver on the MCX surpassed ₹1 lakh per kilo for the first time, hitting ₹1,00,810 on October 22.

With gold prices at record highs, retail buyers are increasingly turning to silver as a more affordable alternative. This rising interest in silver is driven not only by its lower cost compared to gold but also by growing demand from the electric vehicle (EV) sector and photovoltaic applications, which is expected to sustain global demand for silver in the medium to long term.

Meanwhile, investors are awaiting the release of US payroll data today, which could offer additional insights into the Federal Reserve's interest rate outlook.

Recent economic data released on Thursday indicated that the core Personal Consumption Expenditures (PCE) index for September rose to 2.7%, marking the highest monthly increase since April, as per recent media reports. 

Additionally, jobless claims declined, signaling ongoing strength in the labor market. Despite concerns about inflation, the latest data showed that both income and spending remained robust during the month.

Gold to maintain bull run

Despite the record-breaking performance so far this year, gold prices are poised to continue their bull run, as analysts believe that the rising U.S. fiscal deficit is likely to support the yellow metal moving forward. The growing fiscal pressure, particularly if either political party secures sweeping control, could result in a significantly higher deficit.

Domestic brokerage firm Elara Capital noted that hat the 2024 US elections are shaping up to be one of the closest in modern times, and regardless of the outcome, the US fiscal outlook is expected to worsen.

The growing fiscal pressure, particularly if either political party secures sweeping control, could result in a significantly higher deficit. Amid this, the brokerage forecasts a 10% upside for gold over the next 12 months, highlighting contributing factors such as rising interest payments on US debt, escalating fiscal pressures, and the impact of increasing USD yields.

ICICI Bank Global Markets said, “Geo-political tensions could continue to keep up safe haven buying for gold prices. In particular, the Israel-Iran conflict will continue to work as a support. We would also argue that the prospect of a return of Trump as US President and the resumption of the trade-war could create uncertainty about the global growth outlook could also work as an additional bullish catalyst for the yellow metal.”

"If Trump returns as President, there could be further upside potential in gold prices than our forecasts currently assume. We see gold prices trading in the USD 2650/oz to USD 2750/oz range in 1H2025 and moving to the USD 2750/oz to USD 2850/oz range over 2H2025," ICICI Bank Global Markets further added.

Meanwhile, UBS expects a target of $2,900/oz for gold by the end of the third quarter in 2025. "A Trump win could push gold more quickly toward our target, while a Harris win could see it drop back to $2,600-2,700/oz, said UBS. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.