India’s second-largest gold consumer, mostly by household buyers, followed by China, has been eyeing this eye-popping price level for a long time. This year, gold prices have surged 30% and the rally has sustained for 128 weeks, indicating further rise till some clarity is established.

• Key factors driving the surge in gold prices include the slide of the US dollar, treasury bond sell-offs, and tariff-related uncertainties.
• Analysts believe that the current rally has more legs to go, driven by reserve accumulation and geo-political uncertainty.

The spot price of gold was quoted at ₹1,01,245 for 24 carat per 10 gram, while the gold future was proved at ₹99,000 per 10 grams. The spike mirrors the rally in gold prices during the first wave of COVID, when it had breached the ₹50,000-mark for the first time in July 2020.

“Gold has crossed the psychological level of $3,500 an ounce as the dollar fell to a three-year low below 98. President Trump increased pressure on the Federal Reserve, calling for a dramatic rate reduction and even considering replacing Chair Powell,” said Renisha Chainani, Head, Research at Augmont.

Renisha Chainani, Head, Research at Augmont, attributed the surge in gold prices to the decline in the value of the US dollar and the pressure exerted by President Trump on the Federal Reserve. The comments on Mr. Powell reinforced concerns about the Fed’s independence in establishing monetary policy, as well as the outlook for U.S. assets.

1. Reserve accumulation: Gold as a percentage of reserves is the highest now [since 2000], and has seen a meaningful increase since 2021.
2. Geo-political uncertainty: Uncertainty always leads to gold as a safe haven. With the US potentially losing its status as the safe haven (dollar decline, US treasury yields climbing higher), and no resolution to the US-China tariff wars, uncertainty could linger for longer.

“Furthermore, amidst the trade war, China accused the US of abusing tariffs and warned governments not to seek an agreement with the US that compromised Beijing’s interests. Together, these considerations have led to strong safe-haven demand for gold, which is now up 30% this year,” said Renisha Chainani.

“I would conclude that perhaps gold could have more legs in this rally—at least until uncertainty simmers down. Once we see some signs of uncertainty tapering off, we could expect the gold [price] climb to halt,” said Anitha Rangan, economist, Equirus Securities.

Highlights

• Gold prices have surged 30% this year, with the current rally lasting for 128 weeks.
• The rally has been driven by reserve accumulation and geo-political uncertainty.
• The gold price is expected to continue rising until uncertainty simmers down.

“The short-term outlook on gold will remain strong if trade tension escalates between the US and China. However, long-term outlook remains bullish, supported by strong central bank purchases and geopolitical uncertainties,” said Satish Dondapati, fund manager, Kotak Mahindra Asset Management Company.

“This rally has more legs to go. It is driven by reserve accumulation and geo-political uncertainty. I would say it will continue for at least 128 weeks until uncertainty simmers down,” said Anitha Rangan, emphasizing that the current rally has sustained for 128 weeks.

For India, the second-largest gold consumer, this eye-popping price level is significant. With the current rally showing no signs of abating, Indian households and investors may need to adjust their gold buying strategies.

Analysts predict that gold prices will continue to rise until some clarity is established, driven by reserve accumulation and geo-political uncertainty. With the current rally showing no signs of abating, it is clear that gold prices will remain a hot topic of discussion for Indian households and investors.

As the global economy continues to navigate trade tensions, currency fluctuations, and other factors, the price of gold is likely to remain a key indicator of market sentiment.