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Gold has achieved a historic milestone, reaching Rs 1 lakh in the physical market, driven by the weakening dollar and escalating global economic uncertainties. The price of 24 karat gold (999) reached Rs 97,200 per 10 grams, which, with the addition of a 3% Goods and Services Tax (GST), translates to Rs 1,00,116. This surge reflects the continued winning streak of the yellow metal, as the MCX June gold contracts also hit a fresh lifetime high of Rs 97,288 per 10 grams. The MCX gold rate for 10 grams stood at Rs 97,200, marking a substantial increase of Rs 1,946, or 2.04%, compared to the previous trading day. Significantly, gold prices have risen over 26%, representing an increase of Rs 20,800 per 10 grams, within the year 2025 alone. Anuj Gupta, Head Commodity & Currency at HDFC Securities, confirmed the price in Delhi-NCR, which included GST, to be around Rs 1,00,120 per 10 grams. This upward trend is deeply rooted in the international market dynamics, with COMEX gold hovering near $3,407.30 per troy ounce, experiencing a notable jump of $78.90, or 2.37%. The surge in gold prices is closely linked to the weakness of the dollar index (DXY), which has fallen below the 99 mark against a basket of six major currencies. Over the past month, DXY has decreased by nearly 6%, extending its decline to more than 10% over a three-month period. Gold prices and the dollar index typically exhibit an inverse relationship, with gold serving as a hedge during times of uncertainty, much like the dollar itself. Investors and global Central Banks have increasingly favored gold over the US dollar amid concerns surrounding President Donald Trump’s tariff policies, which have created tensions with even traditional allies. The ongoing trade war between the United States and China has further fueled the safe-haven appeal of gold. While reciprocal tariffs have been temporarily deferred for many countries, China remains subject to tariffs and has retaliated with its own measures, raising the specter of a global economic slowdown. This escalating trade conflict has significantly contributed to the demand for gold as a safe and reliable store of value. The price of gold is not solely impacted by the dollar's depreciation. Several intricate dynamics underlie its performance. Geopolitical instability and concerns of recession serve as pivotal factors. The COVID-19 pandemic's initial economic shocks prompted a rush toward safe assets. The Russia-Ukraine conflict intensified fears of instability, further driving up gold prices. As the conflict persists and concerns rise about the global economy, demand for gold remains high. Additionally, the prospect of inflation is a major component. As inflation rises, currencies weaken and consumers lose purchasing power. The price of gold then increases, as it's seen as preserving wealth. Central banks, such as the U.S. Federal Reserve, are also critical influences. Central banks' monetary policy decisions, namely interest rate hikes, impact gold prices. Higher rates tend to diminish gold's appeal, whereas lower rates increase its value. In recent years, central banks in emerging economies have diversified their reserves by buying more gold and reducing their dependence on the U.S. dollar, increasing demand and prices.
The escalating Sino-US trade war, coupled with a weaker dollar, has significantly contributed to the rise in gold prices. “Concerns over global economic growth as a result of the escalating Sino-US trade war are driving the rise, with a weaker dollar adding to the momentum,” Renisha Chainani, Head - Research at Augmont, noted. Fundamentally, markets are factoring in heightened geopolitical risks, fueled by U.S. trade tensions and stagflation concerns, while persistent central bank demand adds to price pressures. On April 2, US President Donald Trump imposed reciprocal tariffs on dozens of countries, and while his administration has suspended duties for some, it has escalated its trade war with China. These factors collectively create a favorable environment for gold, driving its price to unprecedented levels. The price of gold is also influenced by several other fundamental factors that are intertwined with the broader economic and geopolitical landscape. Inflation expectations play a crucial role, as gold is often viewed as a hedge against inflation. When inflation is anticipated to rise, investors tend to allocate more capital to gold, thereby driving up its price. Conversely, if inflation expectations are subdued, the demand for gold may decrease, leading to a moderation in its price. Interest rate policies implemented by central banks, particularly the U.S. Federal Reserve, have a significant impact on gold prices. Higher interest rates tend to make bonds and other interest-bearing assets more attractive, reducing the relative appeal of gold, which does not offer a yield. Conversely, lower interest rates make gold more attractive as an alternative investment. In addition, geopolitical tensions and uncertainty tend to boost the demand for gold as a safe-haven asset. Political instability, military conflicts, and trade disputes can all lead to increased demand for gold, driving up its price. Central bank buying and selling of gold can also have a significant impact on prices. When central banks increase their gold reserves, it tends to support prices, while selling of gold reserves can put downward pressure on prices. Global economic growth prospects also influence gold prices. A strong global economy tends to reduce the demand for gold as investors seek higher-yielding assets, while a weak global economy can boost the demand for gold as a safe haven.
Another important factor to consider is the impact of technological advancements on the gold market. The rise of digital currencies, such as Bitcoin and other cryptocurrencies, has created a new asset class that competes with gold as a store of value. While cryptocurrencies are still relatively new and volatile, some investors see them as an alternative to gold, particularly among younger generations. The supply of gold is also a key factor that influences its price. Unlike fiat currencies, which can be printed at will by central banks, the supply of gold is limited by the availability of resources and the costs of mining and refining. Constraints in the supply of gold can put upward pressure on prices, especially during times of high demand. Market sentiment and speculation also play a significant role in gold price movements. News headlines, economic data releases, and geopolitical events can all influence investor sentiment and drive short-term price fluctuations. Technical analysis, which involves studying past price patterns and trading volumes, is also used by some investors to make predictions about future price movements. The gold market is a complex and multifaceted ecosystem, influenced by a wide range of factors, including macroeconomic trends, geopolitical events, technological innovations, and investor sentiment. Understanding these factors is essential for making informed investment decisions in the gold market. The recent surge in gold prices to a record high of Rs 1 lakh is a testament to the enduring appeal of the yellow metal as a store of value and a hedge against uncertainty. While the factors driving gold prices may fluctuate over time, the fundamental role of gold in the global financial system is likely to remain unchanged.
Source: Gold creates history, hits Rs 1 lakh mark for the first time riding on dollar weakness