Why are gold prices at record high?
Credits: The Economic Times

Why are gold prices at record high?

In this year 2023, the gold price is expected to cross Rs 60,000. Some people are speculating about this. That’s why it becomes necessary to know what are the reasons behind the rise in the price of gold. It is known that in the Comex Market, the gold future has come down to $1852 per ounce and the gold spot price has come down to $1847 per ounce.

For the third consecutive day i.e. on January 4, 2023, there has been an increase in the price of gold. If market experts are to be believed, gold prices are currently at a two-year high. While the price of silver is also above 70 thousand rupees.

Gold
Credits: The Economic Times

Gold price may see some softness in the coming months, but the rally may come in the second and third quarter of 2023, says Navneet Damani, senior VP of Motilal Oswal Financial Services. Damani says some correction may come in the current quarter, but demand may increase in the second and third quarters when Covid-linked restrictions are over in China. If this happens, the price of gold in the international market can go up to $2100 an ounce and on MCX, it can cross Rs 60 thousand. In this article, we are going to tell you the reason behind gold crossing 60 thousand rupees, which you can read at a glance.

Mains Reasons

The decline in the rupee against the dollar in India is not stopping. Against the dollar, the rupee has again reached 83 rupees from 81 rupees. This is affecting the price of gold.

One reason behind the rise in the price of gold is the Fed Policy Rate. The US Fed Reserve says that the increase in the policy rate in the year 2023 has decreased as compared to last year 2022. Due to this, the price of gold has got a lot of support in the international market.

The same decline is being seen in the dollar index, which was running ahead of 105 in the last days of last year. He is now trading at 104.

The ongoing war between Russia and Ukraine shows no signs of abating or abating. Due to which investors turned towards safe haven. Due to high demand, there is a rise in the price of gold.

There has been an increase in the demand for gold from the Central Banks around the world and there has been a lot of buying. Due to this the price of gold has increased.

The season of weddings will start in India in the month of February. Due to which the demand for gold is increasing in the market. Due to the increase in domestic demand in India, there is a rise in the price of gold.

Even though the havoc of Covid has started again in China, but the New Year festive season has started in China. Due to which the demand for gold has started increasing.

The same China is the world’s largest importer of gold and after the opening of the economy, the demand has started increasing further.

Gold prices
Credits: Mint

Rise in price due to dollar?

Gold is an international commodity and its pricing is largely fixed in dollars. Gold prices usually rise when the dollar weakens. The US dollar index was at 114 in September last year. From there it has come down to around 103. This is its lowest level in 7 months.

In the year 2021, the dollar index had come close to 89 from 101 and then gold had given 17 percent return. In view of the threat of recession, if the US Federal Reserve reduces the interest rate in the second half of the year 2023, then the dollar index can go down sharply. Gold will get support from this.

Kunal Shah, head of commodities research at Nirmal Bang, cites another factor. He says that most of the trade between Russia and China is being done in their own currency. This is reducing the circulation of dollars in trade. This trend may increase. If Russia starts trading with other countries also in ruble and currency of those countries, then this year the dollar index will crack. This will lead to a rally in Gold.

Is inflation and interest rates in favor of gold?

Gold is also seen as an inflation hedge, but raising interest rates to control inflation has a negative impact on gold sentiment as it increases the cost of holding gold. The US Federal Reserve has been raising interest rates since last year to combat high inflation. It raised the interest rate by 50 basis points in December. Before that, he had increased 75-75 basis points for three consecutive times.

But now the trends of decreasing inflation are visible in America. Consumer prices in the US showed a softening in December as compared to November. It is believed that the measures of the US Federal Reserve are having an effect. This has also raised hopes that the Federal Reserve will lower interest rates at its next meeting. At present, speculations are being made to increase the rate by only 25 basis points. This is the reason why gold crossed $1900 per ounce in the international market. Currently it is at $1920. This is its highest level since April last year.

Gold Prices at record high
Credits: Goodreturns

Geopolitical tensions behind the price hike?

In addition to the Ukraine war, the conditions of the U.S. and China’s tensions have remained on Taiwan. Also the concern related to Covid remains. Dearness has not come in confortable zones in terms of central banks and the risk of bearish is also hovering. In such an uncertain environment investors bet on assests considered safe. Senior VP of Motilal Oswal Financial Services Navneet Damani says, ‘Increasing inflation anxiety and uncertainty leads to a rally in Gold. Concerns related to geopolitical and Covid will continue to support Safe Haven Assessments.

The ongoing war between Russia and Ukraine shows no signs of abating or abating. Due to which investors turned towards safe haven. Due to high demand, there is a rise in the price of gold.

Future Predictions

gold-price - Gold prices hit record high
credits: Telegraph India

Gold price may see some softness in the coming months, but the rally may come in the second and third quarter of 2023, says Navneet Damani, senior VP of Motilal Oswal Financial Services. Damani says some correction may come in the current quarter, but demand may increase in the second and third quarters when Covid-linked restrictions are over in China. If this happens, the price of gold in the international market can go up to $2100 an ounce and on MCX, it can cross Rs 60 thousand.

Nirmal Bang’s Commodities Research Head Kunal Shah says Gold gave good returns in India in the year 2022 as there was a weakness in the rupee against the dollar. A big bull run is expected in Gold in the year 2023. This may happen in the second half of this year. This year can give at least 10 percent returns from Gold for Rs. The returns in dollar terms can range from 12 to14 percent.

Kunal Shah says that in view of geopolitical tension, central banks of all countries are buying Gold. They are betting on Gold for hedging of any turmoil in the Finanshall Market. In such a situation, Gold can go up to $2200 an ounce in the coming time.

Lotsdue CEO Abhishek Banerjee is also expecting further bullish momentum in Gold this year. Apart from the shopping of Central Banks, he is betting on a demand linked to the wedding-byah in India. He also says that crypto had drawn a lot of money, but the bad outcome of the crypto market has increased the charm of gold.