Domestic Gold Jumps To New Record As Global Prices Surge

Domestic gold jumped to its highest level on Monday on the MCX amid rising expectations of a rate cut by the U.S. Federal Reserve in March.

The February futures contract for the metal rose for the second consecutive session to as high as Rs 64,063 on Monday, according to MCX data.

"Initially, gold prices got a push from the geopolitical conflict," Ravindra Rao, head of commodity research at Kotak Securities, said. "Geopolitical tensions have not gone away, but a Fed pivot is playing out despite the officials giving out mixed statements. The market works on sentiment."

International prices rose as much as 3% to $2,152.30 per troy ounce. Since October, the yellow metal has gained 12.8%, according to Bloomberg, on fears of a hard landing in the U.S. Data from the CME FedWatch tool shows an over 50% probability of a rate cut in March and nearly 100% in the May despite Fed Chair Jerome Powell saying that "it would be premature to conclude" when the policy might ease.

Citing similar reasons, Manav Modi, an analyst who tracks commodities and currencies at Motilal Oswal Financial Services Ltd., said that the latest rally is driven by geopolitical tensions between Russia-Ukraine and Israel-Hamas, strong domestic demand on account of wedding season, and a change in stance of the U.S. Federal Reserve.

After crossing the brokerage's previous target of Rs 63,000, Modi expects the price of gold to further rise to Rs 65,500 in the domestic market and $2,200 on COMEX. He recommended that investors exit short positions and adopt a 'buy on dips' strategy to accumulate longs.

According to Rao, if the global prices do sustain above $2,090, $2,200 per troy ounce is on the cards, according to Rao. "We're witnessing a clear inverse head and shoulders pattern developing."