Gold Prices Hit Record High | Insights into the Recent Rally and Future Outlook

Discover why gold prices have surged to a new all-time high, and what the future holds. Explore the impact of economic policies, and market dynamics on the precious metal's rally and future prospects.

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Gold Price Today: Yellow metal hits lifetime high of Rs 69,918 per 10 grams 

Gold prices hit a new all-time high on Thursday, April 04, making headlines across the financial markets, with the yellow metal touching a new lifetime peak of Rs 69,918 per 10 grams as of Thursday, April 4th. The rally seen in gold prices over the past couple of months is not just a mere fluctuation; it's fuelled by a complex blend of geopolitical tensions, economic forecasts, and investor sentiment, particularly in light of recent developments in the Middle East. Following the Israeli attack on the Iranian Embassy, investors are increasingly turning to gold, a traditional safe haven, to protect their wealth.

Liquide Predicts Gold's Glittering Future

Anuj Bajpai, the Co-founder and CEO of Liquide, has been in the spotlight for his accurate predictions regarding the equity markets and gold. In January 2024, Bajpai forecasted a bright future for gold as an appealing investment alternative to equities. This prediction was confirmed as gold prices steered towards Rs 70,000, marking a remarkable 9.3% increase in March alone – the most significant monthly increase since July 2020. Gold futures have notably jumped from a February low of $2,018.4 to surpass $2,300 per ounce, showcasing the metal's robust demand.

For more insights, access the full article here: Interim Budget 2024 | Market Outlook

Impact of Economic Policies on Gold

Previously, gold prices saw a rise following hints from the chair of the US Federal Reserve about possible interest rate reductions in 2024. After these hints were made, the chance of a 25 basis point rate cut in June escalated from 59% to 70%. Nevertheless, this probability experienced a slight dip after the release of robust manufacturing data, showcasing the most significant growth in the manufacturing sector in the last 18 months. However, the overall sentiment remains in favour of lower rates, benefiting gold.

Gold prices often move inversely to interest rates. When interest rates decrease, gold becomes more attractive relative to fixed-income assets like bonds, which offer lower returns in an environment of reduced rates.

Surge in Speculative Buying and Central Bank Purchases

The Commodity Futures Trading Commission's report highlights a significant spike in speculative buying, with the net long position in gold reaching 141,083 contracts, marking the highest level since March 2022. Moreover, hedge funds made significant moves by acquiring 285 tonnes of gold in a mere two weeks of March.

Several factors support the optimistic outlook for gold, among which purchases by central banks play a crucial role. In 2023, central banks around the world added 1,037 tonnes of gold to their reserves, approaching the peak levels recorded in 2022. These purchases have counterbalanced the continued selling of Gold ETFs, which have been witnessing outflows for nine consecutive months.

Retail Gold Fever

The surge in gold prices can also be attributed to retail buying of jewellery, bars, and coins. In addition to the People’s Bank of China leading global central banks in gold purchases, the country also topped the charts in retail gold buying. The World Gold Council's data reveals that in 2023, China surpassed India as the largest buyer of gold jewellery worldwide. Chinese consumers purchased 603 tons of gold jewellery, marking a 10% increase from the previous year. 

Similarly, India's consumer gold demand remains among the highest globally, particularly peaking during the country's wedding season from October to December and January to March.

Gold Outlook for 2024: What Lies Ahead

As gold's stellar performance continues, its rising cost is becoming a barrier for retail investors, especially in price-sensitive markets such as India. The World Gold Council notes that while India's appetite for gold jewellery remains robust, escalating prices may slightly curb consumer spending. In 2023, the demand for gold jewellery in India fell by 6% to 562.3 tons compared to the previous year. Conversely, India's investments in gold bars and coins saw a 7% increase on an annual basis. Furthermore, the Reserve Bank of India's gold purchases are stronger than ever, with an 8.7-ton acquisition in January alone—the largest monthly buy since July 2022.

Looking ahead to 2024, the prospects for gold remain bright. Amidst the backdrop of global geopolitical unrest, pivotal elections in both India and the US, and the unpredictability of interest rate decisions, gold is expected to retain its lustre for investors. 

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