Gold prices edge above $1,890; Check out the key reasons
Gold has always been considered to be a safe haven when it comes to asset classes. Not only does the precious metal hold high value, but is also considered to be a hedge against inflation. Gold prices witnessed a decent rally recently on the back of several factors with international gold prices trading around $1,890 per ounce.
The geopolitical tensions caused due to the Russia-Ukraine war last year disrupted the global supply chains causing muti-decade high inflation in most economies. This boosted the safe-haven appeal of the yellow metal and many investors looked to hedge against inflation. Gold prices touched an all-time high of $2,075 in March 2022. Although gold prices steadily declined since then, the improvement in demand for gold has supported the price and has helped maintain a bullish sentiment.
Additionally, the recent gains in gold prices can be attributed to the softening of the US Dollar index from its high of 114 level witnessed in September. A pullback in US bond yields further added to the gains in gold prices.
Strong demand from China and India, the largest consumers of gold, also supported the precious metal prices. Moreover, buying by the central banks and fears of economic recession in the developed countries also lifted the safe-haven asset class.
However, gold is highly sensitive to rising interest rates. It is because high interest rates increase the opportunity cost of holding the non-yielding bullion.
On the domestic front, gold prices have also seen some gains on the Multi Commodity Exchange (MCX). The precious metal prices surged above Rs 57,000 per 10 grams for the first time.
In the international markets, gold prices increased by around 19% between November 2022 and January 2023. However, during the same period, MCX gold gained by only 14%. This difference was mainly because of the appreciation in the domestic currency, Rupee, against the US dollar.
Current Prices of Gold and Silver
On February 9, the gold April futures contract on the MCX traded around Rs 57,250. While that in the international market was trading above the level of $1,892/oz.
Meanwhile, another precious metal, silver was trading around Rs 67,700 per kg on the MCX and it was above $22.46 in the international market.
With a nearly 2% fall since the beginning of 2023, the Indian benchmark barometer has emerged as one of the worst performers in 2023 among global peers.
Even though the benchmark equity index Nifty has fallen more than a percent in 2023 YTD, the Nifty IT index has outperformed the benchmark by gaining around 10% this year.