If there is one item whose price has been consistently marching north, it is gold. According to reports, it has risen 30% in 2024, with geopolitical tensions, prospect of another rate cut by the US Fed after a more-than-expected 50 basis point cut in September and the uncertainty arising out the US presidential elections.
Significantly, gold price in the Indian market is substantially dependent on the global prices since every year India imports a huge quantity of gold. In fact, it results in the second biggest forex expenditure in the country after crude oil.
White House and price of yellow metal
Explaining the latest surge in gold prices, experts have said that uncertainty over the US presidential elections have raised the demand for the metal. As Donald Trump and Kamala Harris raise their election pitch, be prepared for higher prices of gold. “We have been forecasting, and factoring in our calculations, a rise in gold prices since the middle of this year,” Joydeep Sircar, director, B Sircar Johuree, a Kolkata-based jeweller that is more than a century old.
“With the U.S. election less than three weeks away, market caution is likely to remain a key theme. Given the tight race between Donald Trump and Kamala Harris, this adds another layer of uncertainty – stimulating demand for safe haven assets,” FXTM senior research analyst Lukman Otunuga was quoted in the media as saying.
Uncertainty a trigger for gold price rise
Uncertainty has always been a factor that has triggered rise in the price of gold. So has been interest rate cuts, on the ground that a reduction in interest rates means lower returns from fixed-income securities.
After the aggressive rate cut by the US Fed in September, the governing council of European Central Bank (ECB), too, trimmed three ECB interest rates by 25 basis points that would come into effect from October 23, 2024.
Before Diwali, Dhanteras
Experts have said that while the US presidential elections would continue to add uncertainty to the scenario, the most close the contest, the bigger the uncertainty, which will continue till the poll results are known. Moreover, due to Diwali and Dhanteras, demand for gold would rise even in the elevated price levels of the metal in the Indian scene.
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