Gold surges to all-time high amid rate cut expectations; has it reached its peak?

Gold prices are trading at record highs globally in today’s trading session ahead of the US Fed policy meeting. MCX gold prices are trading at ₹88,380, whereas Commex gold prices have hit a record high of $3,012/ounce.

Colin Shah, MD, Kama Jewellery stated that the key reasons supporting gold prices globally could be attributed to the expectations of further rate easing by the Fed. The accumulation of gold by Reserve Bank of India (RBI) is another reason gold prices are kept elevated in the domestic market. Moreover, concerns over a severe economic fallout and aggressive tariff policies by the US are also some key drivers pushing gold prices upwards. "Considering the global scenario, funds are increasingly moving to gold due to its safe haven feature, which provides a hedge against inflation and economic instabilities. We now expect gold prices to touch levels of $3100/oz internationally, and ₹90,000/10gm domestically," said Shah.

Comex Gold futures extended their rally on Monday, closing above $3,006 per ounce as weak U.S. economic data and a softer dollar fuelled safe-haven demand. A report by Kotak Securities, states, "Geopolitical risks remain elevated, with the U.S. reaffirming military action against Houthi forces. Pentagon spokesperson Parnell warned of severe consequences for any attacks on US troops. Meanwhile, Israel detected heightened Hamas activity near Gaza, potentially signalling new strikes. Today, Gold futures surge to all-time high of $3024 amidst heightened investor anxiety stemming from concerning US economic data and escalating Middle East tensions. Now, market focus now turns to the Fed’s policy meeting for insights into future monetary policy."

As per Tata mutual funds report, "Gold prices may continue to trade firm in medium term over central banks rate cut regime, geopolitical factors and supportive fundamentals like central bank buying, new Trump administration policies which has triggered new trade war. Currency driven volatility and equity market performance may keep price volatile in near term. Monetary policy developments, dollar Index, US yields, and real rates will also be key factors to watch."

Besides, the attractive gold/silver ratio has drawn investment into silver. Silver prices have rallied recently nearing October 2024 levels. US rate cuts and China stimulus effect on industrial metals prices may support silver prices along with ignited trade war. "Slower growth from China may continue to be a worry for industrial demand for Silver. However, the longer-term demand outlook is positive for green technologies, solar photovoltaic (PV) technology and renewables.