Gold Shines Bright in the New Year
In January, the price of gold has surged by more than 750 rupees, bringing cheer to investors.
Gold and Silver Prices Reach New Heights
Gold prices hit a two-year high, with an intra-day peak at Rs 55,772. Meanwhile, silver is trading over Rs 70,000, marking a substantial increase.
Factors Driving the Gold Price Rally
- Fed Policy Support: The US Federal Reserve’s decision to be less aggressive in raising policy rates in 2023 has boosted gold prices internationally.
- Dollar Index Decline: The dollar index, which was above 105, has fallen, signaling a positive trend for gold.
- Geo-Political Tensions: Ongoing conflicts, like the Russia-Ukraine war, have led investors to seek safety in gold, driving up its demand.
- Central Bank Purchases: Central banks worldwide have been buying gold heavily, contributing to its price surge.
- Rupee Depreciation: The rupee’s weakening against the dollar, due to local factors, has a direct impact on gold prices.
- Recession Fears: IMF’s warning of a potential recession affecting major economies like the US, Europe, and China has spurred investor demand for gold.
- Domestic Demand Growth: As the wedding season approaches in February, domestic demand for gold is on the rise, especially in rural areas.
- Chinese Demand Surge: Despite renewed COVID concerns, China’s economy is reopening, coinciding with the New Year festival season, leading to increased demand for gold.
IIFL Vice President Anuj Gupta suggests that factors like the Fed policy outlook and geopolitical tensions are major drivers behind gold’s surge. Recession fears and increased demand for safe havens are also contributing to the rise.
Director of Kedia Advisory, Ajas Kedia, points out that the falling dollar index and a less hawkish policy outlook play a significant role. The declining Indian rupee against the dollar is also a local factor boosting gold prices.
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