Explained: Why are gold prices on the rise

Gold prices have been on the rise, with movement recorded on the Multi Commodity Exchange (MCX) on Friday, October 4, 2024. Gold futures, maturing on December 5, 2024, were priced at Rs 76,468 per 10 grams after gaining Rs 224, or 0.29%, from the previous close of Rs 76,244. The recent rise in gold prices can be attributed to the safe-haven demand triggered by the ongoing conflict in the Middle East, particularly the tension between Israel and Iran.
As geopolitical tensions rise, investors often turn to gold, considered a stable investment during uncertain times.
The gold market is also watching the US payrolls report closely, as it could give clues about the Federal Reserve’s future policy direction. This report will help investors gauge how the US economy is performing and what steps the central bank might take regarding interest rates, which often affects gold prices.
In times of conflict or economic uncertainty, investments in gold are seen as a “safe haven.”
Unlike equities, which can fluctuate in value based on a company’s performance, or currencies, which may weaken due to inflation, gold tends to maintain its value. Historically, gold has been a reliable store of wealth, especially during crises. People tend to invest in it when they feel that other investments are too risky, such as during a stock market downturn or when inflation rises.
The ongoing conflict between Israel and Iran is a major factor driving the current rise in gold prices. According to experts, the situation is making investors nervous, pushing them to seek safer investments.
“The price of gold is still trapped in a small trading range due to conflicting underlying signals. Geopolitical worries support the metal, although the strength of the USD limits recent advances,” said Dr Renisha Chainani, Head of Research at Augmont – Gold For All.
She highlighted that tensions escalated after Hezbollah launched around 230 rockets from Lebanon into Israel, prompting Israeli strikes on Hezbollah’s intelligence offices in Beirut. Additionally, Iran’s recent missile attacks on Israel have further fuelled concerns of a full-scale war, which continues to support gold prices.
“Gold remains supported at around Rs 75,400 per 10 grams, with resistance at Rs 76,500,” Dr Chainani added.
Gold’s rise isn’t happening in isolation. The ongoing conflict has also affected crude oil prices, with West Texas Intermediate (WTI) crude oil testing $74 per barrel. This increase in oil prices has indirectly supported precious metals, as global markets react to the situation.
Rahul Kalantri, VP Commodities at Mehta Equities Ltd, explained the connection and said, “Gold and silver gained in the international markets as Israel’s aggression continued in Lebanon, with rising tensions amid Iran’s missile attacks. The potential for an Israeli assault on Iran’s oil infrastructure has also driven crude oil prices higher, which in turn supported precious metals.”
However, a strong U.S. dollar and steady bond yields have limited the gains in gold and silver. Kalantri noted that despite these factors, gold is trading at fresh breakout levels internationally, which could indicate further price increases in the coming sessions.
“Gold has support at Rs 75,350-74,970 and resistance at Rs 76,050. Silver has support at Rs 92,050-91,450, with resistance at Rs 93,690-94,380,” he added.
Justin Khoo, Senior Market Analyst APAC, VT Markets said that following the news of Israel being attacked by Iran on Tuesday night, the NIFTY 50 Index Futures have been on a continuous decline and since then, NIFTY has dropped a total of 575 points.
Meanwhile, oil prices have surged for the third consecutive day, with Brent crude approaching $75 per barrel on Thursday. Polymarket, a decentralised prediction platform, currently forecasts a 38% chance of an Israeli response to Iran’s attack by Friday. This could lead to a potential shift of capital into safe-haven assets like gold.
“Before considering trading gold, two key factors must be monitored: strong labour data on Friday and a decisive gold close above 2685.49. Only if these conditions are met should we proceed to identify suitable buy areas,” said Khoo.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)