Gold, silver prices rally, futures hit lifetime highs on MCX: What's driving the surge?

Silver hit an all time high today

Gold and silver prices extended significant gains on September 1, with future contracts of the precious metals hitting fresh lifetime highs on MCX.

Gold's futures contracts with October expiry jumped more than 2 percent to hit an all time high of Rs 1,05,937 per 10 grams today. Domestic prices of the yellow metal also increased sharply, trading at around 1,05,880 per 10 grams in the local markets.

"A softer US dollar and renewed safe-haven demand supported the rally, as investors turned to gold amid ongoing uncertainty surrounding US monetary policy. Growing political pressure may accelerate the timeline for interest rate cuts, with markets largely pricing in a 25 bps reduction in September—a development that remains supportive for bullion," said Axis Securities.

The futures contracts of silver with December expiry meanwhile jumped around 3 percent to hit a lifetime high of Rs 1,24,990 per kilogram. In the domestic markets, silver was trading at around Rs 1,26,000 per kilogram.

"The rally was driven by market expectations of Federal Reserve rate cuts and  robust industrial demand. Recent US data showed core PCE inflation rising 2.9% annually in July, the fastest since  February, while consumer spending jumped the most in four months, signalling economic resilience. These figures kept September rate cut expectations intact, with Fed Governor Waller backing a 25 bps reduction and further easing in the coming months. On the industrial front, silver demand was further bolstered by China’s expanding solar energy sector," said Axis Securities.

Today, spot gold extended its rally, buoyed by increasing expectations of a September rate cut, growing uncertainty around Trump tariffs, and the escalating standoff between the Fed and the Trump administration, said Kaynat Chainwala, AVP Commodity Research, Kotak Securities.

"San Francisco Fed President Mary Daly signaled that policymakers may be ready to lower interest rates soon, noting that inflation driven by tariffs is likely to be temporary. Meanwhile, political and trade uncertainty lingers a U.S. court ruled that Trump’s sweeping trade tariffs were illegal, while a decision on whether Lisa Cook can continue her Fed duties is not expected before at least Tuesday," the analyst added.

Manav Modi from Motilal Oswal Financial Services also noted that the precious metals were up on safe-haven buying. "Along with increasing rate cut expectations, tensions between Israel and Gaza and other geo-political tensions and the tariff escalations are continuously supporting buying in bullions, as increased expectations of a U.S. Federal Reserve interest rate cut this month lifted bullion's allure…Increase in festive and wedding demand, ETF buying and Increased premiums in China are some of the additional factors supporting gold’s bull run," he added.

Also read: For the first time in decades, gold is beating US Treasuries in central banks’ vaults

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