Gold rose to fresh all-time highs on Friday after three straight weeks of gains as softening inflation and continued conflict in the Middle East boosted safe-haven buying. Gold futures traded in New York closed at $2,089.70 per ounce, surpassing the previous high seen in August, 2020. Gold prices in India were at an all-time high of ₹65,170 per 10 gm in Mumbai. Silver spot prices too hit all-time highs on Friday.
Fund managers and analysts expect further gains in both metals but the moves may not be one way.
“Both metals are likely to do well, but volatility will remain a major factor,” said Lakshmi Iyer, CEO, investment & strategy, Kotak Alternate Asset Managers. “Rupee depreciation will help the prices, but the pace may not be that steep.” Gold prices could move up or down by 3% over the next two months, said Navneet Damani, senior vice-president, head of commodities and currencies, Motilal Oswal Financial Services.
“Volatility in gold prices is likely as the tug of war in headwinds and tailwinds for this segment continue to remain,” said Damani. “If there is a further uptick, it will not be significant.” Damani said recessionary fears and growth normalcy in many economies could keep a lid on gold prices.
Analysts said historically, interest rate cuts have boosted gold prices, but the key here is the pace of the rate cut. Though many on Wall Street think the US Fed could be done with its interest rate hike cycle on easing inflationary pressures, the uncertainty is over when it would start cutting rates.
Analysts said investors will keep a watch on inflation and the geopolitical tensions to decide on future trends in gold. Damani said that the escalation of the conflict in the Middle East and an expectation of a rate cut by March 2024 are two major drivers of gold prices. “The central bankers are net buyers of gold due to weaker currency and disproportionate debt in US are factors that have driven gold prices up,” said Iyer.
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