Gold Price Hits All-Time High Amid Heightened Geopolitical Tensions

Domestic prices of gold hit an all-time high of Rs 78,340 per 10 grams on the Multi Commodity Exchange on Monday but fell to trade at Rs 78,123 per 10 grams. The prices are driven higher by heightened geopolitical tension in West Asia and the South China Sea.

This month, the price of gold has increased by about Rs 2,700/10 grams. At the same time, silver futures on MCX saw a rise of more than Rs 2,500/kg and silver futures reached Rs 98,224/kg intraday.

On Saturday, Israel’s Prime Minister Benjamin accused militant group Hezbollah of trying to assassinate him and his spouse. The prime minister’s office said a drone was launched toward his residence, but he and his wife were not home and there were no injuries.

In response, Israel has launched more airstrikes, ostensibly targeting Hezbollah infrastructure, in Gaza and Lebanon.

This morning, the global gold futures hit an all-time high of $2,746.8 per troy ounce. Since the start of September, prices have risen nearly 9% and are up over 37% over the last year.

Separately, just days after Beijing conducted large-scale military drills around Taiwan in the South China Sea, President Xi Jinping was quoted by state-run broadcaster CCTV as saying that troops should strengthen their preparedness for war.

Global markets are also reacting to the closely fought presidential election in the U.S., with former President Donald Trump and Vice President Kamala Harris seen as neck and neck. 

Gold prices in India move in lockstep with global prices, because India is predominantly an importer of the commodity, said Rajiv Popley, managing director of the Popley Group.

Financial planners generally advice investors to have a maximum of 10-15% of their investment corpus in gold, preferably in digital form. The Sovereign Gold Bond is the preferred investment option here on account of the tax advantages it provides.

However, with issuances of these bonds having dried up, investors can consider buying gold exchange traded funds, according to Harshvardhan Roongta, co-founder of Roongta Securities.

After the changes to the structure of capital gains tax in Budget 2024, gains from gold ETFs are considered long-term after 12 months and are taxed at 12.5%. Short-term gains are taxed at an investor’s slab rate.