Gold At Record Again; Nears USD 5,600 Per Ounce Mark: What Should Investors Do?

Gold prices are at a record high again, extending their rally as investors continued to stack up the safe-haven asset due to geopolitical uncertainty. Gold touched fresh highs as investors reacted to the US Federal Reserve’s decision to keep interest rates unchanged amid mounting pressure from President Donald Trump’s administration to cut rates.

Gold spot prices surged to USD 5,588.71 per ounce, rising over 3 per cent from the previous close, and currently trading at USD 5,558.21 per ounce. In the futures market, gold for April delivery traded at USD 5,584.15 and reached a record high of USD 5,594.76.

On MCX, Gold futures for delivery in April traded at Rs. 1.82 lakh per 10 grams. Meanwhile, silver prices on the MCX for March delivery traded at Rs. 3.99 lakh per kg.

Gold prices have more than doubled in the last two years, with prices surging nearly 20 per cent this year alone. Silver prices have also surged sharply, rising nearly 60 per cent this year alone.

Why is gold rallying, and how much more is left?

The sharp surge in gold prices is led by a combination of factors, which include geopolitical tensions along with a fall in the dollar against its peers. Investors turned to the safe-haven asset with fears of Trump’s tariff threats on several allies, which has led to volatility in global equity markets. Along with this, central banks have also led the demand for bulking up on gold reserves due to the uncertainty on the geopolitical front.

Concerns that the US government may shut down, along with the independence of the Federal Reserve, have also aided the rise in gold prices. Threats of criminal charges against the Fed Chair Jerome Powell amid constant pressure to cut rates have also cast a cloud on the successor to Powell, who is due to retire in May.

The US Federal Open Market Committee, on January 28, decided to keep interest rates unchanged. A lower interest rate cycle increases the demand for gold. If the Fed keeps rates lower for a longer time, gold prices could further rise, market participants said.

Market experts say that gold prices could further rise to USD 6,000-7,000 per ounce by the end of the year, depending on how geopolitical situations and other risks unfold.

The rise in gold prices domestically will also depend on the movement of the rupee against the dollar. Rupee breached the psychologically crucial level of 92 against the dollar, testing a new record low in early trade.

What should Investors do?

With gold touching record highs almost daily, market participants suggested caution for retail investors before investing in the asset.

“Further USD 5,700-5,800 (per ounce) is resistance in gold. Retail investors should wait for a correction to enter the market, as prices have appreciated too far. Hence, a wait-and-watch strategy should be followed,” Jigar Trivedi, Senior Research Analyst, at Reliance Securities, said.

Investors should also consider their individual risk tolerance levels before investing in gold. With the surge in gold prices, silver has also followed suit. However, experts suggest the rally in silver is nearing its end.

“…There could be another 15 per cent rally left (in silver). We see at USD 125/oz as the last point before a sharp correction emerges,” Trivedi added.