Gold prices reached a three-month high on Friday, October 20, and were set for a second straight weekly gain. Spot gold was up 0.2% at $1,978.19 per ounce by 0542 GMT, after hitting its highest since July 20. US gold futures added 0.5% to $1,989.90, according to a Reuters report.

Back home, gold futures, maturing on December 5, 2023, stood at ₹60,615 per 10 grams on the MCX, after recording a marginal hike of ₹272 or 0.45%.

The impetus behind this rally can be attributed to two key factors: the escalating Middle East conflict and the growing sentiment that the Federal Reserve's rate hikes may be approaching an end.

Gold as a safe haven in troubled times

Gold has always held a special place in the world of finance and investment, often seen as a safe haven during times of economic and political uncertainty. In India, it transcends mere financial value, deeply intertwined with the country's culture and traditions.

As the Israel-Hamas war intensifies, there's a fear that it could evolve into a broader regional crisis, potentially turning into a protracted conflict. Israeli Defense Minister Yoav Gallant's remarks, hinting at a potential ground invasion to obliterate Hamas, have only heightened these concerns.

Investors, mindful of these geopolitical tensions, are flocking to safe havens, with gold topping the list.

Gold has shown its resilience in the face of uncertainty, rising by 2.4% in a single week, as investors sought refuge from the stormy seas of global politics and finance.

Anuj Gupta, Head of Commodity & Currency at HDFC Securities, attributes the recent rally to Chairman Jerome Powell's dovish stance on interest rate hikes. This has halted the US dollar's rally, prompting gold's ascent.

The outlook

Fitch Solutions takes a neutral stance for gold prices in 2023, projecting an average of $1,950 per ounce. This perspective has been supported by comments from Federal Reserve Chair Jerome Powell, who hinted at a pause in rate hikes. The rising interest rates have been increasing the opportunity cost of holding gold, but this trend seems to be moderating.

Spot gold is expected to continue its upward trajectory into a range of $1,998 to $2,010 per ounce, marking a significant technical breakthrough as it broke through the $1,972 resistance, experts believe.

Ravindra Rao, VP of Head Commodity Research at Kotak Securities Ltd, suggests that gold prices are likely to maintain a bullish bias. The Middle East crisis, coupled with the possibility of a future rate hike, keeps the tension high, making gold an attractive prospect for investors.

Investment approach

For a significant portion of society, gold symbolises stability during times of uncertainty. It serves as a scarce yet highly liquid asset, with a positive long-term outlook. Gold not only acts as a hedge against currency devaluation and inflation but also plays a vital role in diversifying investment portfolios to mitigate risks during times of crisis.

As geopolitical tensions persist and economic fluctuations continue to unsettle markets, experts think that gold remains an appealing and reliable investment option.

(Edited by : Amrita)

First Published:Oct 20, 2023 12:49 PM IST