Why are gold prices rising?

• Gold spot price reached a record high of $2,758.37 for an ounce on October 23, amidst geopolitical tensions and economic uncertainty.
• Gold prices have been marginally corrected from this record high, with prices at $2,731.45/ounce.
• In India, gold was at ₹7,513.37/gram, 40% higher than ₹5,354.20/gram a year ago.
• Gold’s safety haven characteristic and lower co-relation with other asset classes make it a safe haven during periods of geopolitical stress and economic uncertainty.
• Gold prices are suggested to hold an inverse relationship with interest rates, with tightened interest rates making gold less attractive to investors. Conversely, lower interest rates and a weaker dollar can prompt investors to opt for the safety bullion cushion.
• Central banks purchase gold to hedge against global uncertainties, not diversifying their forex reserves.
• Demand for gold traditionally peaks in the second half of the year with the arrival of the festive season and the onset of the wedding season.
• Gold prices are determined by forces of supply and demand, with gold being finite and the gestation period from mining to production often taking decades to respond to market dynamics.
• The decline in the U.S. dollar with the Fed’s rate cut and geopolitical tensions helped the rally.
• Prices of gold may continue upwards, with international market rates potentially coming down between early to mid-November by about $50 to approximately $2,650/ounce.
• Investment demand has been strong, supported by strong price performance of the yellow metal.
• WGC expects increased demand from rural areas due to improvements in overall consumption and favorable monsoons and higher crop sowing.