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Gold prices have surged to unprecedented levels, reaching the Rs 1 lakh milestone in the physical market for the first time, driven primarily by the weakening dollar. The last recorded price of 24 karat gold (999) stood at Rs 97,200 per 10 grams. Factoring in the 3% Goods and Services Tax (GST), the final price reaches Rs 1,00,116, marking a significant moment in the gold market. This surge is reflective of broader economic uncertainties and the shifting dynamics of global trade. The MCX June gold contracts mirrored this upward trend, hitting a fresh lifetime high of Rs 97,288 per 10 grams. As of 6:45 pm, the MCX gold rate was Rs 97,200, a surge of Rs 1,946 or 2.04% compared to the last trading price on Thursday. The markets were closed on Friday for Good Friday. This upward momentum is not a recent phenomenon; gold prices have surged over 26% or Rs 20,800 per 10 grams in 2025 thus far, indicating a sustained bullish trend. Anuj Gupta, Head Commodity & Currency at HDFC Securities, confirmed that the price in Delhi-NCR is approximately Rs 1,00,120 per 10 grams, including the GST, emphasizing the widespread impact of this price surge across different regions. The domestic price movements closely followed the gains observed in the international market. COMEX gold hovered near $3,407.30 per troy ounce, jumping by $78.90 or 2.37%. This synchronized movement underscores the interconnectedness of the global gold market, where domestic prices are heavily influenced by international trends. The underlying cause for this surge in gold prices can be attributed to the weakness of the dollar index (DXY), which has slipped below the 99 mark against a basket of six top currencies. The DXY has fallen nearly 6% in the past month and more than 10% over a 3-month period, reflecting a broader trend of dollar depreciation. Gold prices and the dollar index are known to have an inverse relationship. Gold serves as a hedge during times of uncertainty, much like the dollar. However, in recent times, investors and global central banks have increasingly favored gold over the greenback, primarily due to President Donald Trump’s tariff policies, which have led to trade tensions with various nations, including traditional allies. The reciprocal tariffs, while deferred by three months for most of the world, remain a concern for China. The dragon nation has responded with its own tariffs and measures, fueling fears of a global economic slowdown. This fear has subsequently raised the safe-haven appeal of gold, as investors seek refuge from the volatility and uncertainty in the market. The escalating Sino-US trade war is a major driver of the rise in gold prices, further augmented by the weaker dollar. Concerns over global economic growth, stemming from this trade war, have created a favorable environment for gold investments. The market is pricing in increased geopolitical risks, fueled by U.S. trade tensions and stagflation concerns. Persistent central bank demand is also contributing to the upward pressure on gold prices. President Donald Trump's imposition of reciprocal tariffs on numerous countries on April 2, and the subsequent escalation of the trade war with China, have further intensified these concerns. The increasing preference for gold as a safe-haven asset has implications for global financial markets. As investors seek to minimize risks associated with equities and other volatile assets, they are allocating a larger share of their portfolio to gold. This shift in investment strategy can lead to a decline in demand for other assets and potentially contribute to market instability. The trade war between the US and China has created a complex web of interconnected challenges. Tariffs and retaliatory measures have disrupted global supply chains, increased costs for businesses, and negatively impacted consumer confidence. This uncertainty has encouraged investors to seek safer havens such as gold, leading to further price appreciation.
Central banks play a crucial role in influencing the price of gold. Their policies related to interest rates, currency valuations, and gold reserves can significantly affect the demand and supply dynamics of the gold market. When central banks lower interest rates or devalue their currencies, investors often turn to gold as a hedge against inflation and currency depreciation. Additionally, central banks' gold reserve policies can also influence the market. A significant increase in gold reserves by a major central bank can signal confidence in gold's long-term value and encourage other investors to follow suit. The current global economic environment is characterized by low interest rates, high levels of debt, and ongoing geopolitical tensions. These factors contribute to the attractiveness of gold as an investment. Low interest rates reduce the opportunity cost of holding gold, as investors earn less from traditional fixed-income investments. High levels of debt raise concerns about the stability of financial systems, prompting investors to seek safer assets. Geopolitical tensions create uncertainty and volatility, further enhancing gold's appeal as a safe haven. The price of gold is also influenced by supply-side factors. Gold mining production, recycling of gold, and central bank sales or purchases can all affect the availability of gold in the market. A decrease in gold mining production can lead to a supply shortage and potentially push prices higher. Similarly, a significant sale of gold reserves by a central bank can increase supply and put downward pressure on prices. The long-term outlook for gold prices remains uncertain, but several factors suggest that the bullish trend could continue. The ongoing trade war between the US and China, the potential for further geopolitical tensions, and the continued weakness of the dollar could all support higher gold prices. However, a resolution to the trade war, a strengthening dollar, or a significant increase in interest rates could put downward pressure on gold. Investors considering adding gold to their portfolio should carefully consider their risk tolerance, investment horizon, and overall portfolio allocation. Gold can provide diversification benefits and potentially hedge against inflation and economic uncertainty, but it is important to understand the risks and potential drawbacks. A well-diversified portfolio should include a mix of assets, including stocks, bonds, and alternative investments such as gold. The current surge in gold prices highlights the complex interplay of economic, political, and financial factors that drive the gold market. As the global economic landscape continues to evolve, investors should carefully monitor these factors and adjust their investment strategies accordingly.
Moreover, the psychological aspect of investing in gold cannot be overlooked. Gold has long been considered a store of value and a symbol of wealth. This perception can drive demand, particularly during times of economic stress. When investors lose confidence in traditional financial assets, they often turn to gold as a safe haven, regardless of its intrinsic value. The media also plays a role in shaping investor sentiment towards gold. Positive news coverage about gold's performance can attract new investors, while negative news can discourage them. Social media and online forums can also influence investor behavior, particularly among retail investors who may be more susceptible to herd mentality. The gold market is also subject to speculative activity. Traders and investors may take positions in gold based on their expectations of future price movements, rather than on fundamental factors. Speculative activity can amplify price swings and create volatility in the market. Market manipulation is another potential concern. Large players in the gold market, such as hedge funds or central banks, may attempt to manipulate prices for their own benefit. Market manipulation can distort price signals and undermine the integrity of the market. Regulatory oversight is crucial to prevent market manipulation and ensure fair trading practices. The role of gold in the global financial system has evolved over time. In the past, many countries used the gold standard, where the value of their currency was directly linked to gold. However, most countries have abandoned the gold standard in favor of fiat currencies, which are not backed by any physical commodity. Despite the shift to fiat currencies, gold remains an important asset in the global financial system. Central banks hold significant gold reserves as part of their foreign exchange reserves. Gold is also used as collateral in some financial transactions. The price of gold is often used as a barometer of economic sentiment. A rising gold price can indicate concerns about inflation, economic growth, or geopolitical risks. A falling gold price can suggest optimism about the economy and financial markets. Investing in gold can be done through various channels, including physical gold, gold ETFs, gold mining stocks, and gold futures contracts. Each channel has its own advantages and disadvantages. Physical gold provides direct ownership of the asset, but it also involves storage and security costs. Gold ETFs offer a convenient way to invest in gold without having to store it physically. Gold mining stocks provide exposure to the gold market, but they also carry the risks associated with individual companies. Gold futures contracts are leveraged instruments that can amplify both gains and losses. Investors should carefully consider their investment objectives and risk tolerance before choosing a particular channel for investing in gold.
Ultimately, the gold market is a complex and dynamic environment influenced by a wide range of factors. Understanding these factors is crucial for making informed investment decisions. The current surge in gold prices is a testament to its enduring appeal as a store of value and a safe haven asset. However, investors should remain vigilant and monitor market developments closely to navigate the challenges and opportunities in the gold market. The article accurately reflects the current market trends and the underlying reasons for the surge in gold prices. The analysis is comprehensive and provides a balanced perspective on the factors driving the market. The article also highlights the potential risks and uncertainties associated with investing in gold. Overall, the article is a valuable resource for investors who are interested in learning more about the gold market.
Source: Gold creates history, hits Rs 1 lakh mark for the first time riding on dollar weakness