Gold prices at Rs 1 lakh mark? Factors driving yellow metal demand

Gold rates today: Gold prices on Tuesday hit a fresh high on MCX amid a sharp weakness in otherwise safe haven dollar, in the backdrop of a tug of war between the US President Donald Trump and the US Federal Reserve Chair Jerome Powell over interest rate cuts. US-China trade tensions, concerns over global economic growth and purchasing of 29.1 metric tons of gold ETFs by China in the first 11 days of April, had already added sheen to the yellow metal. 

Besides, the US Federal Reserve recently issued a warning that tariffs could threaten its dual mandate of maintaining stable prices and full employment, which further strengthened gold’s safe-haven appeal.

On Tuesday, the MCX gold contracts for June delivery gained 1.71 per cent to Rs 98,946 per 10 grams. They hit a record high of Rs 99,178 per 10 grams earlier today. Inclusive of GST, the yellow metal has breached the one lakh mark in India. Globally, COMEX June contracts hit a fresh lifetime high of $3,500.8 per ounce after hitting earlier highs of $3,495.5 per ounce and $3,485.9 per ounce.

Angel One's Prathamesh Mallya said gold has surged more than 30 percent this year as trade tensions have caused jitters in the markets, boosting the demand for safe haven assets -- except for the dollar index, which has plunged by more than 4 per cent  this year. "Strong flows to bullion-backed exchange-traded funds and  continued purchases by central banks have also supported the trend," he noted.

In a fresh flare up, the US President Donald Trump asked Federal Reserve Chair Jerome Powell to cut interest rates "pre-emptively" to help boost the economy, saying Powell had been consistently too slow to respond  to economic developments.

Axis Securities said the ongoing trade tensions between the United States and China have intensified global uncertainty, driving investors toward safe-haven assets. "Until there is a concrete breakthrough in negotiations between the two economic giants, bullish sentiment in gold is expected to remain firmly intact," it said.

Rahul Kalantri, VP for Commodities at Mehta Equities noted that the dollar index has slipped to 3-year low as the US President and Fed Chairman’s tussle over interest rate cuts. Instability in the US dollar has increased safe-haven bid for gold, he suggested.

"The US-China trade war has also increased safe-haven demand for gold.  Uncertainty in the global financial markets and escalating US-China trade war continue to support prices of precious metals. Comex Gold has support at $3,440-3,410 while resistance at $3,480-3,500," he said.

In India, Kalantri said gold has support at Rs 96,750-96,200 per 10 grams. 

Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities said the ongoing rally in gold is being supported by escalating tariff tensions, concerns over the US economic outlook, and the looming US debt crisis. 

"Continued buying from China, global central banks, and institutional investors has added momentum to the bullish sentiment. Technically, as long as Comex holds above $3,250 and MCX above Rs 91,000, the uptrend remains intact. Any dips towards Rs 93,000 in MCX may offer fresh buying opportunities," he said.

He said given the elevated levels, speculators in gold are advised to maintain low-risk positions to manage potential volatility.