Gold Rush! Prices Hit Record Highs; Check What's Behind The Surge In Yellow Metal Rates

Gold jumped to fresh records on Wednesday, 25 September as the US dollar slipped further and hints that the Federal Reserve may still cut interest rates went some way to fuel further demand for the precious commodity. Spot gold gained 0.2 per cent to USD 2,661.53 an ounce after it had touched a new high earlier in the session at USD 2,670.43. US gold futures gained 0.3 per cent to USD 2,686.10 an ounce. In India, on Wednesday, gold prices touched a fresh high. 24-carat gold touched a price of Rs 75,280 per 10 grams and that of 22-carat raised to Rs 69,007.

One of the significant factors was the weaker dollar, which slipped 0.2 per cent in making gold relatively cheaper for buyers who hold other currencies. Any time the dollar drops, the demand for gold overseas usually increases, pushing up prices. Expectations of additional interest rate cuts helped push prices upward as well. The US Federal Reserve cut its rates by 50 basis points a few days ago, and the market is still expecting another cut in the near term, in November.

China has also hinted at further rate cuts to boost its underperforming economy, which may increase its gold appetite even more.

Rate cuts usually pump liquidity into the market, which makes people chase safety in such gilded metals as gold. Inflationary concerns, too, fuelled the surge. US Federal Reserve Governor Michelle Bowman yesterday said that inflation continues to surpass the Fed's 2 per cent target threshold, making it prompt to be cautious over future rate cuts. A zero-yield asset, like gold, is often sought after by investors when inflation is surging as it acts as a hedge against rising prices.

Geopolitical tensions have also been driving the gold prices. The current conflict between Israel and Hezbollah, which has been intensified by the Israeli bombing of Beirut, has made sure that fear of war in its full-scale nature will not fade away. It has increased demand for gold as it happens to be a haven.

Analysts expect an increase in the investment inflows into gold-backed exchange-traded funds, mainly from the West, which would propel prices further upwards. Bullion is nearing resistance points at USD 2,690 and then at USD 2,710 per ounce, and bulls await Federal Reserve Chairman Jerome Powell's speeches during the Thursday session and US inflation figures on Friday for more guidance on the market.