Gold crosses Rs 83,000 per 10 gm: What's driving the rally and what's next?

Gold prices in India surged above Rs 83,000 per 10 grams on Tuesday, February 4, following the global gold price rally. Spot gold in international markets traded near an all-time high of $2,830.49 per ounce. This spike is driven by multiple factors, including rising inflation concerns, volatile equity markets, and geopolitical tensions.

Why are gold prices rising?

Several factors are fueling the latest surge in gold prices:

1. Global Inflation Concerns: The U.S. government’s tariff policies, especially with China, Mexico, and Canada, are creating inflationary pressures. This is pushing investors to view gold as a safe haven, particularly in uncertain economic environments.

2. Safe-Haven Demand: With market volatility and global tensions, investors are flocking to gold as a secure asset. This is accentuated by unstable equity markets and rising geopolitical risks.

3. Central Bank Buying: Central banks worldwide are increasing their gold holdings, further supporting the upward momentum of prices.

4. Dollar Index Movement: The U.S. dollar index, recently crossing the 109 mark, has had a ripple effect on commodities, including gold, making it more attractive as the dollar weakens.

5. Supply-Demand Dynamics: A shift in bullion reserves, with major banks moving their holdings from hubs like Dubai and Hong Kong to the U.S., is influencing gold’s price dynamics.

What’s next for gold prices?

Market analysts predict continued price fluctuations in gold, driven by upcoming economic data from the U.S. The ADP employment report and non-farm payroll data are expected to impact the Federal Reserve's stance on interest rates, which could either provide further support to gold or trigger price corrections.

Rahul Kalantri, VP of Commodities at Mehta Equities, expects the bullish momentum to continue, with support levels around Rs 82,980-82,710 per 10 grams and resistance at Rs 83,470-83,650 per 10 grams. Meanwhile, Colin Shah, MD of Kama Jewelry, cautioned that a rising dollar index could lead to short-term corrections.

Should you invest in gold now?

Experts suggest a cautious approach when it comes to investing in gold. Instead of lump-sum investments, they recommend staggered buying, especially if you are looking at gold as a long-term hedge against inflation. Gold ETFs and sovereign gold bonds could be favourable for long-term investors.

Physical gold is still an option, but buyers should consider additional costs like making charges and storage.

Gold’s upward trajectory is likely to continue, fueled by inflationary pressures, geopolitical risks, and central bank buying, but investors should stay alert to price fluctuations as global economic trends evolve.