Gold Prices Hit Record Highs in India Amid Global Trends and Festive Demand

Gold prices in India have reached new heights, marking an all-time high as of October 16, 2024. The significant rise in gold prices is fueled by a combination of global market forces and the country’s increasing demand ahead of the festive season. As Diwali and Dhanteras approach, India—known for being the second-largest consumer of gold globally—is seeing a sharp rise in gold demand, especially among jewelers and consumers eager to make purchases during the festive period.

On the global stage, the price of spot gold climbed 0.3% to $2,667.97 per ounce, reflecting growing investor interest in the precious metal. In India, the price of 24-carat gold surged to ₹77,390 per 10 grams, setting a new benchmark. Analysts and experts attribute this surge to multiple factors, including declining US Treasury yields and ongoing geopolitical uncertainties.

One of the primary international factors driving gold prices higher is the easing of US Treasury yields. The 10-year US Treasury yield, in particular, has dropped for three consecutive sessions, making zero-yield assets like gold more attractive to investors. As US Treasury yields decline, the opportunity cost of holding gold decreases, drawing more investors to the precious metal. This drop in yields is primarily driven by growing expectations of potential interest rate cuts by the US Federal Reserve. The anticipated easing of monetary policy is seen as a pivotal moment for gold, as it opens up the possibility of increased investment demand in the commodity.

Commodity strategists, like Soni Kumari from ANZ, believe that the anticipated monetary policy shifts will be a significant driver for gold prices in the coming months. According to Kumari, the expected easing of US monetary policy is a game-changer for gold prices, setting the stage for heightened investment demand. As interest rates ease, gold becomes a more attractive investment, solidifying its position as a safe-haven asset during uncertain economic times.

In addition to monetary policy factors, geopolitical tensions are playing a substantial role in pushing gold prices higher. The ongoing geopolitical uncertainty in regions like the Middle East has triggered a wave of risk-off sentiment among investors, prompting them to seek out safer investments like gold. Safe-haven flows have been increasing as investors try to protect their wealth against potential economic shocks arising from these geopolitical risks. Renisha Chainani, the Head of Research at Augmont - Gold for All, highlighted that the heightened demand for gold is directly linked to these geopolitical concerns, as investors look for stable assets amidst growing global threats.

In India, the festive season has further amplified demand for gold. Diwali and Dhanteras are traditionally associated with increased gold purchases, as consumers buy jewellery and invest in gold as part of the cultural festivities. According to Colin Shah, Managing Director of Kama Jewelry, the current season has brought an unprecedented level of demand, with expectations of a 10-15% increase in year-on-year gold purchases. Shah emphasizes that this year’s demand for gold far surpasses last year’s, driven by both consumer sentiment and favourable price movements in the international market.

As the festive season progresses, industry experts are predicting that gold prices in India will continue to climb. Analysts attending the London Bullion Market Association’s annual conference have forecasted that gold could reach $2,941 per ounce within the next 12 months, further pushing up domestic gold prices. This optimistic outlook is supported by current global trends, which remain highly favourable for gold as an asset.

Renisha Chainani also predicts that gold prices in India could rise to ₹78,500 per 10 grams if international trends persist. The combination of strong festive demand and global uncertainties has made gold an attractive investment option for both short-term buyers and long-term investors.

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For investors, gold remains a reliable and stable asset. As global events unfold, especially regarding US monetary policy and ongoing geopolitical risks, the outlook for gold prices will largely depend on how these factors evolve. In the meantime, gold continues to be a solid bet, offering safety and growth potential amidst economic and political uncertainty.

[Disclaimer: The information provided in this article is for informational purposes only and should not be considered as financial advice. The opinions expressed are those of the author and do not necessarily reflect the official stance of any organization. Always consult with a financial expert before making any investment decisions.]