Editor’s Note
This article highlights a significant surge in gold prices, driven by global tensions and economic uncertainties. The rapid increase underscores gold’s role as a traditional safe-haven asset during volatile periods.
On Friday, February 8, 2025, gold prices witnessed a massive surge, with gold rising by over ₹8,150 in six weeks. Due to global tensions and economic uncertainties, gold prices on MCX have increased by ₹2,500.
On MCX, the price of gold closed at ₹84,900 per 10 grams, after previously reaching a new peak of ₹85,279. This week, gold recorded a gain of over ₹2,500 per 10 grams, while over the past six weeks, it has risen by nearly 10.90%. In the international market, gold prices have also been on a continuous upward trend for six weeks, reaching $2,886 per ounce in the spot market.
1. US Economic Uncertainty and Trade War:
2. Geopolitical Tensions and Middle East Crisis:
3. Global Central Bank Interest Rate Cuts:
Over the past six months, several major central banks have cut interest rates, boosting demand for gold. The Bank of England cut rates for the third consecutive time to 4.50%. The European Central Bank (ECB) reduced its rates to 2.75%. The Bank of Canada also cut by 25 basis points. The Reserve Bank of India (RBI) cut the repo rate from 6.50% to 6.25% after five years.
4. Increase in Global Gold Demand:
According to a recent report by the World Gold Council, global gold demand in 2024 increased by 1% to 4,974.5 metric tons, a record high. This growth is primarily due to investment demand and purchases by central banks.
In the US, only 143,000 new jobs were added in January 2025, while the market expected 169,000 jobs. Consequently, the US unemployment rate fell to 4%, its lowest level since May 2024. Weak jobs data is increasing uncertainty about the US economy, leading to rising demand for gold.
The recent increase of ₹8,350 per 10 grams in gold prices has attracted investors’ attention. Due to global economic instability, the drop in the US unemployment rate, trade wars, and central bank policies, gold prices are continuously rising. In such a scenario, it is essential for investors to understand whether this is the right time to invest.
Why is this the right investment opportunity?
(i) Upward Price Trend: Gold prices have risen by 10.90% in the past six weeks, and analysts believe this rally may continue. In the long term, gold prices are expected to reach ₹90,000 per 10 grams.
(ii) Safe Investment Option: Whenever volatility increases in the global market, investors consider gold a “safe haven.” In the current circumstances, investing in gold has become a lower-risk option due to fluctuations in the dollar and stock markets.
(iii) Impact of Interest Rate Cuts: Due to interest rate cuts by central banks, investors are leaning more towards gold. When interest rates fall, investments like bonds and fixed deposits become less attractive, increasing demand for gold.
(iv) Protection Against Inflation: Gold has always been considered a safe investment against inflation. If inflation rises, the purchasing power of currency decreases, but the value of gold remains.
Which Investment Option to Choose?
Physical Gold: Better for traditional investors. Benefit: Convenience for investment in jewelry. Risk: Storage and security costs.
Digital Gold: Better for small investors. Benefit: Instant buy-sell facility. Risk: No interest in the long term.
Gold ETF: Better for stock market investors. Benefit: Trading facility in the stock market. Risk: Stock market risk.
Sovereign Gold Bonds (SGB): Better for long-term investors. Benefit: Interest and tax exemption. Risk: 8-year lock-in period.
Gold Mutual Funds: Better for regular SIP investors. Benefit: Professional management. Risk: Management fees apply.