Gold Prices Hit All-Time High Amid Rate Cuts, Geopolitical Conflicts

Gold prices have surged to record highs both internationally and domestically, driven by recent interest rate cuts and ongoing geopolitical conflicts. The US Federal Reserve's 50 basis points (bps) cut in interest rates, along with expectations of further cuts, has weakened the dollar and fueled higher demand for gold.

Additionally, tensions between Israel and Hezbollah, as well as the ongoing Russia-Ukraine war, have pushed investors towards the safety of the yellow metal.

In the international market, gold prices reached a historic $2,685.42 per ounce on September 26, while domestic prices in Mumbai hit Rs 75,750 per 10 grams, with MCX Gold Futures for October touching Rs 76,000. So far in 2024, gold prices have risen around 30 per cent internationally.

The interest rate cut by the US Federal Reserve, the first since 2020, has sparked a rally in gold prices, with analysts suggesting that gold and the dollar have an inverse relationship. As the dollar weakens, investors tend to buy more gold as a hedge against economic uncertainty.

Analysts also pointed to continued central bank purchases of gold, part of a global strategy to reduce reliance on the US dollar in foreign reserves—a move spurred by US sanctions on Russia following the Ukraine war.

Looking ahead, experts expect gold prices to rise further, with the US Federal Reserve projected to introduce more rate cuts, potentially adding another 25 bps each in November and December. As geopolitical tensions and economic uncertainty persist, gold is expected to remain a key asset in investors' portfolios.