Gold Price Surges Rs 1,324 in One Week to Rs 1.26 Lakh: Factors Behind the Rally and Future Outlook

The price of 24-carat gold (10 grams) experienced a significant increase of Rs 1,324 over the past week, closing at Rs 1,26,666 compared to Rs 1,25,342 at the beginning of the week.

This remarkable surge in gold prices has been primarily driven by heightened safe haven buying and growing expectations of interest rate cuts by the US Federal Reserve.

According to data from the India Bullion and Jewellers Association (IBJA), the precious metal has been on a steady upward trajectory throughout the week.

The CME FedWatch Tool indicates that the probability of the Federal Reserve lowering rates by 350 to 375 basis points at its December monetary policy meeting has increased substantially to 86.9 percent from 71 percent just a week earlier.

Market analysts have observed that gold has retested resistance in the $4,215 to $4,240 range and requires a strong catalyst to break above the $4,240 mark.

Experts suggest that if gold sustains its upward momentum, it could potentially target the previous record high of $4,400 (approximately Rs 131,500). Conversely, a downward movement might see prices retreat to around $4,100 (Rs 123,000).

The yellow metal did experience a slight decline on Friday following the resolution of the US government shutdown, which alleviated concerns about potential economic disruption.

Technical analysis indicates support levels for gold at Rs 1,25,750-1,24,980 per 10 grams, with resistance at Rs 1,27,750-Rs 1,28,400. For silver, support is observed at Rs 1,60,950-Rs 1,59,400 per kg, while resistance stands at Rs 1,63,850-1,64,900.

Market experts anticipate the current softness in bullion to persist in the near term, unless there is renewed interest in safe haven assets or a definitive shift in the Federal Reserve's policy stance.

In a recent report, Bank of America projected that gold could potentially reach $5,000, supported by macroeconomic tailwinds including elevated government debt levels, persistent inflation, lower interest rates, and unconventional US economic policies.

The report also highlighted that institutional allocations in gold remain relatively modest despite rising prices.

Other factors to monitor include declining demand from China, supply constraints in key mined metals, and low global inventories, according to the bank's analysis.