Gold climbs to record highs as rate-cut bets fuel safe-haven demand
Gold climbs to record highs as rate-cut bets fuel safe-haven demand
Gold prices surge on expectations of Fed rate cuts and growing safe-haven demand, with dollar weakness and India and China factors pushing the rally.
Gold prices have surged to record highs this year, underpinned by a weakening dollar, speculative futures trading, central bank diversification, and rising investor interest in China and India. Gold averaged 1,462 per ounce in FY20 and has climbed to about 3,465 this year, with prices touching 4,053 in October. Physical demand has remained largely stable, but a cocktail of macro forces has pushed prices higher, turning gold into a more influential factor for inflation readings and monetary policy decisions. 1.08 per cent of the consumer price index is tied to gold, meaning current inflation readings on the core side are largely influenced by its movements. This complexity adds a new layer for the RBI as it balances growth and price pressures in policy making.
On the domestic front, India’s imports tell a nuanced story. While FY24 saw 795 tonnes brought in, the figure dipped slightly to 757 tonnes in FY25. Yet the value has soared, with gold accounting for nearly 9% of total imports worth 451 billion dollars in the first seven months of the fiscal year. Despite tariff shocks, the price rally has persisted, nudging domestic markets and consumer expectations alike.
Economist Madan Sabnavis cautions that the momentum may not sustain unless another shock hits the global system. He ties the rally to the paradox of value — essentials like water are priced low, while gold commands a premium due to scarcity and marginal utility. The future of the US economy remains uncertain; a sharp upside seems less likely, but predicting a downside is equally uncertain. His cautious view sits alongside a broader global context where investors are betting that the Federal Reserve will cut interest rates next month, fueling a safe-haven bid across gold and supporting silver’s own run to fresh records as soft data and dovish commentary bolster rate-relief expectations. In India, futures markets are approaching all-time territory, reflecting deep domestic appetite to hedge against inflation and currency risk.
Cover image source: Gold heads for fourth straight monthly gain; silver hits fresh record high 🔗
