Gold Futures Surpasses Rs 1 Lakh per 10 gm: What’s Driving This Rally?
Gold futures on the Multi Commodity Exchange (MCX) crossed the Rs 1 lakh per 10 grams mark for the first time on Friday, setting a new all-time high.
Gold futures on the Multi Commodity Exchange (MCX) crossed the Rs 1 lakh per 10 grams mark for the first time on Friday, setting a new all-time high. The metal opened Rs 1,108 higher at Rs 99,500 and surged to a peak of Rs 1,00,403. As of 9:50 AM, MCX gold futures were trading at Rs 1,00,233, up 1.87 per cent from the previous close. This milestone is significant for both retail and institutional investors, especially in a climate marked by increased market volatility and uncertainty.
One of the biggest drivers behind this rally has been escalating geopolitical tensions in the Middle East. Reports of Israel launching airstrikes on Iran’s nuclear facilities triggered a wave of risk aversion, prompting investors to shift capital into traditional safe-haven assets like gold. International spot gold also surged, rising 1.5 per cent to USD 3,435.77 an ounce, while U.S. gold futures climbed 1.4 per cent to USD 3,449.60. The gains in gold prices reflect not just regional tensions but also global investor sentiment turning risk-averse.
A weakening Indian rupee has further pushed domestic gold prices higher. As the rupee depreciates against the U.S. dollar, the cost of imported gold rises, directly impacting local market prices. This currency-driven inflation effect adds another layer of upward momentum for gold prices in India.
Other macroeconomic factors have also played a critical role. Recent data from the U.S. shows cooling inflation and a softening job market, leading to increased expectations of interest rate cuts by the Federal Reserve. Lower interest rates reduce the opportunity cost of holding gold, thereby improving its appeal. Investors are also seeking safety amid subdued returns from certain segments of the equity market, including Small-Cap and Mid-Cap stocks, which have underperformed Large-Cap peers in recent weeks.
In terms of returns, gold has strongly outperformed equities. Over the past month, international gold prices rose by 5.54 per cent. On a year-to-date basis, the gain stands at 30.71 per cent, while over the past 12 months, gold has jumped by 47.54 per cent. In the longer term, the five-year return exceeds 103 per cent, indicating multibagger-like performance compared to several large-cap indices and IPO listings.
Gold’s breakout above the Rs 1 lakh level signifies a major shift driven by global risk factors and safe-haven demand. With volatility expected to continue, investors may remain cautious about rebalancing their portfolios.
Disclaimer: The article is for informational purposes only and not investment advice.