Gold prices saw a surge in domestic futures markets on Friday as escalating tensions between Russia and Ukraine fueled safe-haven demand.
By 12:58 PM IST, MCX Gold futures for December expiry had risen 0.73%, reaching Rs 77,250 per 10 grams. Contributing factors included a weakening US dollar, declining bond yields, and geopolitical uncertainty.
Geopolitical Factors Boost Gold’s Appeal
The ongoing Russia-Ukraine conflict continues to drive demand for gold as a safe-haven asset. The geopolitical escalation, including reports of intensified missile activity, has heightened market uncertainty.
This sentiment is mirrored globally, with gold poised for its best week in a year, according to reports.
Daniel Ghali, a commodity strategist, noted that developments in the conflict have significantly bolstered safe-haven flows into gold, showcasing its enduring appeal during periods of geopolitical instability.
Domestic and Global Price Movement
In India, 24-carat gold prices rose to Rs 7,88,200 per 100 grams, marking an Rs 8,700 daily increase. Internationally, spot gold touched $2,628.76 per ounce, reflecting robust global demand. The upward movement aligns with investors hedging against geopolitical and economic risks.
Impact of the US Dollar and Bitcoin
A retreating US dollar and falling bond yields provided further support for gold prices. A weaker dollar typically makes gold more affordable for investors holding other currencies. However, the dollar index, despite crossing the 107 mark, capped some gains.
In parallel, Bitcoin’s record-breaking rise to $98,000 diverted some investor interest from traditional safe-haven assets like gold. Despite this, the enduring relevance of gold in volatile markets remains evident.
Interest Rate Path Adds Uncertainty
Market attention is now turning to the Federal Reserve’s interest rate decisions, with multiple Fed officials scheduled to speak this week.
Speculative investors are cautious about the potential for a 25-basis-point rate cut in December, a factor that could influence gold’s trajectory.
Commerzbank analysts have remarked that while arguments for gold investment remain strong, speculative positions are constrained due to limited liquidity among investors.
Silver and Other Precious Metals Also Climb
Alongside gold, other precious metals are gaining traction. Spot silver recently reached $31.17 per ounce, hitting a one-week high, while palladium and platinum also showed strong gains, climbing to $1,032.99 and $971.66 per ounce respectively.
These movements underline the broad appeal of precious metals during periods of geopolitical and economic instability.
Market Outlook
As investors navigate a mix of geopolitical risks and economic indicators, gold’s role as a preferred safe-haven asset is likely to remain strong.
Upcoming US macroeconomic data, including GDP figures and the Federal Reserve’s interest rate outlook, will likely influence gold’s trajectory in the near term.
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