Gold prices reached a new record level in the domestic futures market on the morning of Tuesday, January 27. Investors are moving towards safer assets due to geopolitical risks. The weakening of the US dollar and fears of interest rate cut by the US Federal Reserve also boosted the rise in gold. February futures on MCX rose by nearly Rs 4,000 (over 2.4%) to Rs 1,59,820 per 10 grams. On MCX, March futures silver jumped by over Rs 20,000 (6%) to hit a record high of Rs 3,54,780 per kg.
boom in international market
According to Bloomberg, gold remains strong in the international market also. It is trading above $5,000 an ounce for the seventh consecutive day. The weakening of the dollar, geopolitical tensions and investor flight from government bonds and currencies have fueled the rally. President Trump has threatened to increase tariffs on South Korean goods. The price of silver also rose by about 7%.
what are the reasons
Gold has more than doubled in value in the last two years. This remains a historical indicator of fear in the market. A big reason for the 17% gain so far this year is the ‘debasement trade’, where investors are moving money out of currencies and Treasury bonds. The massive selloff in the Japanese bond market is the latest example of this. The Trump administration’s actions such as its claim on Greenland, military intervention in Venezuela and attack on the Fed’s independence have also shaken the markets. Investors’ position suggests that they are buying gold on dips, and options traders are expecting further upside.
What to look forward to?
Investors are now keeping an eye on Trump’s appointment of the next Fed Chairman, which will impact interest rate policy. However, the Fed is widely expected to stop cutting interest rates in the next meeting.