Gold Scales New Record High Of Rs 1.24 Lakh — What's Fuelling The Fresh Surge?

Gold prices in India surged to yet another record high on Tuesday, with rates crossing the Rs 1.24 lakh per 10 gram mark, news agency PTI reported, citing data sourced from the All India Sarafa Association.

This development marks a significant milestone, driven by global and domestic factors converging to support the yellow metal's safe-haven appeal.

The new milestone was reached a day after the 24-karat gold closed at a high of Rs 1,23,300 per 10 gram in the spot market.

In the futures market, gold was up 0.56%, with December contracts trading at Rs 1,20,943 per 10 gram at the Multi Commodity Exchange (MCX), at 7:33 pm.

At the heart of this rally lies heightened investor demand amid escalating geopolitical tensions and economic uncertainty. Internationally, spot gold traded volatile around $3,983 per ounce, swinging between $3,980 and $3,940 as markets brace for a heavy data week in the United States.

Here's a look at some of the factors contributing to gold's fresh surge:

The release of the Federal Reserve's meeting minutes, a speech by Chair Jerome Powell, and key indicators such as unemployment figures and nonfarm payrolls are expected to steer market sentiment in the days ahead.

The commodity market is expecting the Fed to proceed with its rate-cut plans for this calendar year, which would in-turn boost gold's momentum.

With limited official data available, investors are leaning on alternative sources to gauge the outlook for the Federal Reserve's monetary policy. Markets are currently pricing in a 25 basis-point rate cut both in this month's meeting and another in December, a scenario that historically benefits non-yielding assets like gold.

US government shutdown jitters add to the domestic turbulence, which led to gold finding an appeal among investors. The metal's price has been increasing in the US spot market since the shutdown began last week, and this, in-turn, has caused a ripple effect that supports gold prices in other markets as well.

"Gold traded volatile near $3,958... as traders brace for a heavy data week in the US," said Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities. "In the domestic market, MCX gold is expected to trade within a broader range of Rs 1,18,500–Rs 1,21,500, with sentiment remaining cautious but biased to the upside."

Globally, the investor sentiment around gold is being shaped by the geopolitical developments, as per analysts. A prolonged political crisis in France, along with the US government shutdown, has intensified safe-haven flows into gold. Meanwhile, Japan's political landscape shifted with the election victory of pro-stimulus leader Sanae Takaichi, dampening expectations for any near-term interest rate hikes by the Bank of Japan — another factor lending support to bullion prices.

"Safe-haven demand strengthened amid prolonged U.S. government shutdown and political crisis in France," noted analysts at Kotak Securities. "Moreover, Japan's pro-stimulus leader Sanae Takaichi's election victory cut expectations of near-term BOJ rate hikes. Robust central bank purchases and rising gold ETF holdings, grown to 587.8 tons this year, also supported the rally."

Notably, central banks continue to demonstrate strong appetite for gold. China's central bank added to its reserves for the 11th straight month in September, according to data from the People's Bank of China.