Gold glittering run: A perfect storm of uncertainty fuels yellow metal at record highs | Stock Market News

Gold has emerged as one of the undeniable champions of the investment landscape year-to-date, solidifying its reputation as a safe-haven asset and reliable store of value. The precious metal’s ascent shows no signs of abating, with domestic prices soaring by 15.72% and international prices surging by an even more impressive 17.54% this quarter. A remarkable feat, gold has shattered previous barriers, establishing 16 new record highs in domestic markets this year, peaking at Rs. 89,796 per 10gm mark.

This surge in gold prices is not a random event, but rather the result of a confluence of several variables. A volatile geopolitical landscape, a declining interest rate environment, economic anxieties exacerbated by the ongoing trade disputes initiated by US President Trump, and escalating inflation risks have all converged to create a bullish environment for gold.

Beyond these macro forces, strategic shifts are further fueling demand. Central banks globally are actively diversifying their reserves, reducing their reliance on the US dollar and aggressively accumulating gold. This trend is evidenced by central banks purchasing over 1,000 tonnes of gold annually for the past three years. Furthermore, after a prolonged period of outflows, gold ETFs are experiencing renewed investor interest, with global gold ETFs attracting net inflows of $9.4 billion in February alone – the largest monthly influx since March 2022. Adding a potentially significant new source of demand, China has permitted its 10 largest insurance companies to allocate up to 1% of their assets to gold, which could translate into an additional $27 billion entering the market.

The impact of US President Trump’s second-term trade policies cannot be understated. His escalation of trade tensions through the imposition of sweeping tariffs on key trading partners is expected to affect a staggering $1.4 trillion worth of imports by April 2025. The recent imposition of 25% tariffs on all imported automobiles, effective April 3, 2025, further intensifies the situation. These protectionist measures are widely anticipated to fuel inflationary pressures, disrupt global supply chains, and heighten overall economic uncertainty.

Against this backdrop of economic anxiety, escalating geopolitical risks are also driving investors towards the perceived safety of gold. The ongoing conflicts in Gaza, the protracted Russia-Ukraine war, and persistent instability in Syria are creating a climate of fear and uncertainty, prompting a flight to safety.

The anticipated monetary policy decisions of the US Fed are also playing a crucial role. The indication of two potential rate cuts in 2025 has acted as a significant catalyst, boosting gold prices. The dollar’s subsequent decline of over 4% this quarter has further enhanced the attractiveness of gold. Furthermore, inflation concerns continue to mount, prompting investors to seek protection in gold.

In summary, the combination of uncertainty stemming from Trump’s trade policies, concerns about a global economic slowdown, expectations of further monetary easing by central banks, and central banks’ increasing allocation towards gold is likely to sustain demand for the precious metal. As the April 2nd deadline for Trump’s new tariffs approaches, the lack of clarity regarding the future direction of trade policy will likely keep investors on edge. Trump could either intensify tariffs or remove them altogether, creating market unpredictability that supports gold’s continued appeal.

From a technical perspective, gold’s momentum appears strong. Having decisively breached the crucial upside resistance level of $3,035 per ounce, the gold price is now targeting $3,120 and potentially $3,200 per ounce from a medium -term perspective. However, recent rupee appreciation has introduced a slight headwind for domestic gold prices, which are currently facing resistance at Rs. 89,950 per 10gm mark. A decisive break above this level could pave the way for prices to reach Rs. 91,200 per 10gm in the near term and potentially Rs. 94000 per 10gm levels in the medium term.

Potential risks to the ongoing rally

Despite the bullish outlook, it’s crucial to acknowledge the potential risks that could disrupt this gold rally. The precious metal may be vulnerable to corrective price movements in the third quarter of CY 2025. Any resolution of the geopolitical conflicts or the tariff disputes, an unexpected rise in inflation that prevents the Fed from lowering borrowing costs, or an improved global growth outlook in the second half of the year, could boost risk appetite globally, shift investor sentiment away from gold, and potentially trigger outflows from the safe-haven asset. Therefore, while the near-term outlook for gold remains positive, investors should remain vigilant and be prepared for potential shifts in the market dynamics.

(Author is founder of SS WealthStreet. Views expressed above is completely personal)

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.