Gold prices rallied to all time high levels on September 9, as trade uncertainties and rising expectations of a rate cut by the US Federal Reserve polished the safe haven appeal of the yellow metal.
Gold futures with October expiry crossed the key Rs 1,09,500 per 10 grams mark on the Multi Commodity Exchange (MCX) earlier today. Gold prices on COMEX meanwhile rose to a new record high of $3,694.9 per ounce.
Gold futures with December expiry on MCX hit an all time high of Rs 1,10,400 per 10 grams today. Future contracts with February and April expiries also hit fresh lifetime highs today.
What's leading to the rally in gold prices?
The yellow metal has seen a significant rally in recent days, as US President Donald Trump's harsh tariffs triggered trade uncertainties and heightened concerns. Additionally, the US Federal Reserve is set to meet on September 16-17. Analysts now expect a 50-basis point rate cut at the September FOMC meeting, amid weakening job data.
"August labor market data has paved the way for a 'catch-up' 50 basis point rate cut at the September FOMC meeting, similar to what occurred at this time last year," said Standard Chartered in its latest note, doubling its earlier projection of a 25-bp reduction, following a soft August jobs report. Increased possibility of a rate cut have continued to support the bull run in gold prices.
According to Axis Mutual Fund, gold's rise is being driven by a combination of factors including a weaker US dollar, expectations of interest rate cuts, political pressure on the Federal Reserve, and heightened geopolitical uncertainties that reinforce its position as a safe haven metal. "Demand for gold remains well supported globally as central banks continue to diversify reserves, ETFs attract strong inflows, and investors increase purchases of bars and coins, though jewellery consumption has moderated in price-sensitive markets," it said.
"In India, consumers are adapting to record-high gold prices with profit-taking on old jewellery and authorities expanding hallmarking standards to make lower-purity gold jewellery more accessible, while the upcoming festive season will be crucial in shaping physical demand trends," it added.
What lies ahead?
The domestic brokerage expects gold to be in the range of $3,400-3,600 per ounce this year, and doesn’t see chances for a steep correction unless e US government stops criticizing the Federal Reserve or its members, and there is a big breakthrough in solving global trade and tariff problems.
"Momentum was amplified by safe-haven demand as geopolitical risks intensified, including fresh Russian strikes across Ukraine and retaliatory attacks on energy facilities. Disappointing U.S. economic releases further fueled the rally: weekly jobless claims rose to 237K, ADP payrolls increased just 54K against expectations of 65K, and August nonfarm payrolls delivered a meager 22K rise versus forecasts of 75K, alongside a higher unemployment rate of 4.3%, the weakest employment stretch since the pandemic. Treasury yields fell sharply on the data, with the 10-year dropping below 4.2%, and the U.S. dollar retreated, deepening bullish conviction in gold as investors priced in an almost certain 25 bps September rate cut, with rising probabilities of a more aggressive 50 bps move," said Riya Singh – Research Analyst, Commodities and Currency , Emkay Global Financial Services.
"On the flows side, global gold ETFs registered $5.5bn of inflows in August, the third straight monthly rise, pushing total holdings up to 3,692 tons and assets under management to a record $407bn. While technical gauges signal overbought conditions, with gold advancing over 6% in just seven sessions, the broader backdrop of Fed easing expectations, political pressure on U.S. monetary independence, and intensifying geopolitical tensions continues to anchor the bullish trajectory. This week, attention shifts to U.S. inflation prints (PPI and CPI), which may determine whether momentum extends toward higher levels or consolidates ahead of the September 16–17 FOMC meeting. For MCX, gold is already trading at highs and can test 110000 with support at 106000 – 104000," she added.
Also read: Our LIVE blog on stock market updates
(With inputs from Reuters)
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