Gold prices in India surged to a new high as it neared the Rs 69,000 mark on Monday, at the onset of the current fiscal, in line with the rally globally.
On the Multi Commodity Exchange Ltd., gold futures for June delivery soared as high as 1.8% intraday (Rs 1,225) to Rs 68,926 per 10 gram. The trading window remains open till 11.30 p.m.
In the spot market, the yellow metal touched Rs 68,778, a surge of Rs 1,791 or 2.67%.
Bullion rose as much as $2,265.73 an ounce in the U.S. spot market on Monday, up 1.6% from Thursday’s close.
"Market sentiment is buoyant amid diminishing inflationary pressures in the U.S., fuelling expectations of an impending rate cut by the Federal Reserve," Sugandha Sachdeva, market expert and founder of SS WealthStreet, told NDTV Profit.
The Fed’s preferred gauge of underlying inflation cooled in February, fuelling hopes that the U.S. central bank will make good on its stated intent of making three rate cuts this year.
Gold prices and interest rates generally tend to have an inverse correlation—when rates go up, it makes fixed-income investments (such as bonds and money market funds) more attractive than the precious metal, and vice versa. Thus, investors typically start buying gold ahead of rate cuts.
China's aggressive gold purchases in recent weeks and continued central bank acquisitions of the yellow metal have also contributed to the safe-haven's rally.
A recent World Gold Council report estimates physical gold holdings by investors and central banks are worth approximately $5.1 trillion, with an additional $1 trillion in open interest through derivatives traded on exchanges or the over-the-counter market.
JPMorgan Chase and Co. said last month that gold was its top pick in commodities markets, and the price may reach $2,500 an ounce this year, Bloomberg reported.
In the medium term, Sachdeva said gold prices are projected to ascend towards Rs 72,000, though intermittent pullback rallies cannot be ruled out as near-term rates look slightly overstretched.
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