The shine of precious metals has once again increased in the global financial markets and commodity exchanges. The future prices of gold and silver have registered strength in the American Commodity Exchange (COMEX) and London Bullion Market. In foreign markets, gold has crossed the level of $ 4,200 an ounce, while silver has also seen a strong rise beyond $ 61 an ounce. The direct impact of global signals is also visible on the Indian domestic market i.e. Multi Commodity Exchange (MCX) and local bullion markets, where prices have received support amid the festive season. Commodity analysts say that this boom is not the result of any one immediate event, but many global economic and geopolitical factors are working together behind it. 5 main reasons behind the rise: Why are investors running towards bullion? The following global reasons are mainly responsible for this latest rise in gold and silver prices in foreign markets: Increasing geopolitical tension in the Middle East (Safe-Haven Demand): Uncertainty regarding stability in West Asia, especially the deadlock on the trade route of the Strait of Hormuz and the attacks on Saudi Arabian bases have alerted investors. Whenever fears of war or global unrest deepen, institutional and retail investors move money out of risky assets (like the stock market) and into safe-haven assets like gold and silver. Monetary policy and interest rates of the US Federal Reserve: After soft US employment data and economic indicators, the market is assuming that the US Federal Reserve will refrain from increasing interest rates further or will keep the policy stance flexible. There is no fixed interest or yield on gold. In such a situation, when interest rates remain stable or move towards decline and bond yields soften, the non-yielding metal gold becomes more attractive for investors. Weakness in Dollar Index: The weakness in the US Dollar Index (DXY) has made gold and silver cheaper for foreign buyers. Since gold is traded internationally in dollars, as the dollar weakens, demand in countries with other currencies automatically increases, leading to a surge in global prices. Shortage of supply and huge industrial demand for silver: Unlike gold, its dual character (Monetary + Industrial) is working in the rise of silver. Silver consumption is continuously increasing in solar panels, 5G infrastructure, electric vehicle (EV) battery components and electronics sectors. On the contrary, due to limited production from new mines, the silver market is continuously facing supply deficit, which is providing huge support to the prices. Continued purchases by Global Central Banks: Central banks around the world (especially China, Russia, India and other emerging economies) are purchasing physical gold on a large scale to reduce their dependence on the US dollar in their foreign exchange reserves. This institutional demand is acting as a strong base for gold prices. What will be the direct impact on Indian market and festive shopping? India is the second largest consumer of gold in the world and depends on imports for most of its needs. Therefore, whenever the prices increase in the international market, the prices of jewelery and coins also increase in the domestic bullion markets due to increase in the landed cost. Demand for Dhanteras and Diwali: After Navratri, now the auspicious time of Dhanteras and Diwali is near. In Indian tradition, buying gold and silver at this time is considered extremely auspicious. Due to strong festive demand, local jewelers are already busy stocking up, which is further boosting prices. Effect of Rupee Exchange Rate: Fluctuations in the Indian Rupee against the US Dollar have a direct impact on the price of imported gold. If the rupee remains under pressure, the impact of the rally in the domestic market appears more intense compared to international prices. Forward Strategy for Investors and General Buyers Commodity experts recommend that in the current global uncertainty environment, it would be a wise decision to buy gold and silver in a phased manner (on SIP or dips) instead of making big lump sum purchases. Customers making purchases for weddings and festivals are advised to make purchases only after seeing the hallmark (HUID) and check the clear details of making charges and GST in the bill. In the short term, there may be a slight correction in prices based on profit booking or geopolitical statements, but in the medium to long term, strong fundamentals, industrial demand and buying by central banks indicate that the trend of gold and silver will remain positive.
