Gold Prices Surge Amid Trade War Concerns
Gold Rate Trends in Domestic Markets
As of February 13, 2025, gold prices have surged in the domestic futures market, reflecting a significant uptick in trading activity. The Metal Exchange MCX Gold for April 2025 contracts opened at ₹85,700 per 10 grams, a notable increase from the previous closing figure of ₹85,481. Within the first ten minutes of trading, prices climbed further to ₹85,850, marking a 0.43 percent rise to ₹85,848 around 9:10 AM IST. Notably, this follows an all-time high of ₹86,360 per 10 grams reached on February 11.
This spike in gold prices is attributed to various factors, including heightened geopolitical tensions, central bank buying behaviors, and a downturn in stock market sentiments.
Drivers Behind the Gold Price Rally
Several key factors are influencing the rise in gold prices:
- Concerns Over Trade Wars:
Fears stemming from US President Donald Trump’s potentially aggressive trade policies have been a significant factor contributing to the surge in gold prices. Analysts are apprehensive that increased tariffs on countries including China, Canada, and members of the European Union may instigate a global trade conflict, leading to broader economic instability and impacting global growth dynamics. Historically, gold is regarded as a safe-haven asset during periods of such geopolitical unease.
- Central Bank Purchases:
Recent trends indicate that central banks worldwide have intensified their gold acquisitions over the last year. Reports suggest that China’s central bank added to its gold reserves for the third consecutive month in January 2025, while the Reserve Bank of India has also been active in this space, reportedly purchasing 72.6 tonnes of gold in 2024 alone. The World Gold Council disclosed that central banks accumulated over 1,000 tonnes of gold for the third year running, highlighting a shift in investment strategies amid economic uncertainty.
- Increased Retail Investor Demand:
Amid persistent inflation and wavering confidence in stock markets, retail investors are turning to gold as a hedge against economic fluctuations. January saw gold exchange-traded funds (ETFs) witness an unprecedented inflow of ₹3,751 crore, marking a staggering 486 percent increase compared to the previous month’s inflow of ₹640 crore.
Market Outlook and Expert Insights
Looking ahead, analysts suggest that the current economic data, particularly the US Consumer Price Index (CPI), will play a crucial role in defining future market trends. Federal Reserve Chair Jerome Powell indicated that any anticipated interest rate cuts would be contingent on the assurance that inflation will stabilize around the Fed’s target of 2 percent.
Manoj Kumar Jain, a commodity expert, advises that gold and silver prices may experience volatility in the coming week. Notably, gold has established support levels at $2,914-2,896 per troy ounce, while resistance levels are marked at $2,950-2,970. For domestic investors, the support and resistance for MCX Gold have been identified as ₹85,000-84,450 and ₹85,820-86,300, respectively.
Rahul Kalantri, VP of commodities at Mehta Equities, echoed a similar sentiment, suggesting that gold may fluctuate around support levels of $2,888-2,870 and resistance levels of $2,924-2,942, with corresponding figures in Indian rupees.
Conclusion
As gold continues to be a focal point in uncertain economic climates, investors are urged to maintain vigilance. Keeping abreast of both domestic and international market indicators will be vital for making informed decisions in this evolving landscape. Investors are encouraged to seek advice from certified financial experts before engaging in trades or investments.
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