MUMBAI: Starting the new year on a bullish note, gold prices surged to an all-time high in the futures market. MCX Gold futures rose to Rs 56,245 per 10 gm on Friday, surpassing the previous record of Rs 56,191 hit in August 2020. Rising prices indicate a strong run ahead for gold, believe experts. With a looming recession in developed economies, higher inflation, a falling dollar, and an uncertain geopolitical situation, gold is expected to perform well in 2023.
In the overseas market, gold was trading in green at $ 1,898 per ounce while in the local market, the yellow metal ended the day at Rs 55,990, up 0.21%. Global factors were the main factors behind the surge in gold prices. The decline in retail inflation in the US to a 14-month low and the weakening of the dollar helped the gold prices to shine.
According to data released by the Bureau of Labor Statistics on Thursday, US consumer prices declined to 6.5% in December from 7.1% in November, giving hope that the US Fed’s strategy of to tame inflation is working and the US Fed will also take a softer approach on rate hikes.
“Slowing inflation means less aggressive interest rate hikes by Fed. As per the CME Fed watch tool, the probability of a 25-bps hike in Feb FOMC meeting has gone up to 92.7 per cent. This has supported gold prices to trade above the resistance of $1,884 which is the 8-month high,” said Ravindra V Rao, VP-Head Commodity Research, Kotak Securities.
The weakening of the dollar, fear of recession and geopolitical uncertainty may boost demand for the dollar. The global economy is likely to go through a difficult time as it will face the aftermath of Russia’s invasion of Ukraine, the cost of living crisis and the slowdown in major economies. Also, China’s economic growth is likely to improve this year and which will fuel the demand for the yellow metal. Following the sharp rise in central bank demand for gold in the third quarter of 2022, the outlook for official sector demand for the yellow metal may also be resilient in 2023, say experts.
“Concerns over weaker global economic growth and geopolitical tensions will continue to make gold valuable as hedge against uncertainties. Global central banks purchased around 400 tonnes of gold in the third quarter of CY22 the largest single quarter of demand. Looking at the current situation, the central bank will continue to add gold to its reserves,” said Pankaj Pandey, Head of Research, ICICI Direct.