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Gold Soars to Record ₹ 1,12,750/1og, Silver Surges to ₹1,28,800/kg

By HARISH MANAV/Thenewsdose.com

Chandigarh: Gold has once again stolen the spotlight in global financial markets. On Tuesday, bullion prices jumped by an unprecedented ₹5,080 per 10 grams, touching a lifetime high of ₹1,12,750. Silver too, rode the momentum, climbing to ₹1,28,800 per kilogram. With global gold prices breaching $3,650 per ounce before settling slightly lower, the rally has left traders, policymakers, and investors asking one common question: Is this the new normal?

Global Triggers Behind the Rally

The sharp surge in gold prices is not an isolated event. It is part of a broader global trend driven by:

1. Weak US Labour Data
   Employment data from the United States released last week signaled a softening job market. Investors now expect the US Federal Reserve to ease its monetary policy sooner than anticipated. A dovish Fed typically weakens the dollar and lowers bond yields, both of which make gold more attractive.
2. Dollar Retreat
   The US dollar index has been on a downward slope, slipping against major global currencies. A weaker dollar automatically boosts dollar-denominated assets like gold, as they become cheaper for investors holding other currencies.
3. Safe-Haven Demand
   Amid lingering global uncertainties — from geopolitical flashpoints in Eastern Europe to the slowdown in China — investors are parking money in safe-haven assets. Gold remains the most trusted hedge against uncertainty and volatility.
4. Speculative Momentum
   With gold hitting record highs, speculative interest has intensified. Hedge funds and institutional investors are doubling down, creating a self-reinforcing rally.

Rupee-Dollar Equation and Its Role

For India, the story is slightly different. India is the world’s second-largest consumer of gold, after China, but imports nearly all of its demand. That makes domestic gold prices extremely sensitive not just to global bullion rates but also to the rupee-dollar exchange rate.

Currently, the rupee has remained under pressure due to high crude oil prices and persistent capital outflows. Even if international gold prices hold steady, any depreciation of the rupee against the dollar will continue to push up domestic prices. This dual impact — strong global cues and a weak rupee — has amplified the rally in India.

Inflation Hedge or Investment Trap?

One of the key reasons gold is surging is its reputation as an inflation hedge. With global inflation still elevated despite monetary tightening, investors see gold as a way to protect purchasing power. In India too, high food and fuel inflation has made gold attractive as a store of value.

However, the rally also raises questions: is gold now overvalued? Analysts caution that while gold’s long-term fundamentals remain strong, short-term corrections are inevitable. For retail investors, chasing gold at record highs may carry risks if the Fed’s monetary stance or geopolitical conditions shift suddenly.

Impact on  Consumers

While investors may celebrate, Indian consumers are feeling the pinch.

• Wedding Season Purchases: Traditionally, India witnesses high gold demand during festivals and wedding seasons. But at ₹1,12,750 per 10 grams, affordability has become a major concern. Jewelers expect retail demand to soften despite cultural compulsions.
• Rural Sentiment: In rural India, where gold acts as both an ornament and a savings instrument, the price rise could dampen consumption. This may indirectly affect jewelers, artisans, and even the rural economy.
• Silver Substitution: With silver too hitting a record ₹1,28,800/kg, consumers have limited scope to shift. Yet, some small buyers are already moving to lighter jewelry designs or alternative metals.

The Silver Story

Though overshadowed by gold, silver’s surge is equally significant. Beyond jewelry, silver is a critical industrial metal used in electronics, solar panels, and EV batteries. Its sharp rise indicates not only safe-haven buying but also long-term structural demand from the clean energy transition. For India, a country ramping up its renewable energy ambitions, this could mean higher import bills.

Policy and Macro-Economic Concerns

For policymakers in India, the record rally raises several red flags:

1. Current Account Deficit (CAD): Higher gold imports widen India’s CAD, putting pressure on the rupee. With global oil prices already high, a surge in gold imports could worsen the external balance.
2. Inflationary Impact: Rising gold prices can fuel inflationary expectations among households. Gold often acts as a psychological benchmark for wealth, and its rise may shift consumer behavior.
3. Capital Flows: If gold continues to attract safe-haven inflows globally, emerging markets like India may face capital outflows, further weakening the rupee.

Investment Outlook: What Should Investors Do?

For investors, the rally presents both opportunities and dilemmas.

• Short-Term Traders: The market is clearly bullish, but volatility is likely. Traders may benefit, but timing will be crucial.
• Long-Term Investors: For those looking at gold as a portfolio hedge, staggered buying through Sovereign Gold Bonds (SGBs) or Gold ETFs may be wiser than bulk purchases at record highs.
• Silver Exposure: With silver’s dual role as a precious and industrial metal, it may offer diversification benefits, though it too is highly volatile.

The million-dollar question: Will gold continue to rise?

If the US Federal Reserve indeed shifts to a dovish stance, the dollar weakens further, and geopolitical uncertainties persist, gold may have more headroom to rise. Some analysts project global prices could test $3,800 per ounce in the near term.

However, if US economic data improves and interest rate cuts are delayed, gold may face a correction. In India, much will also depend on how the rupee performs against the dollar in the coming months.

Gold’s record-breaking rally to ₹1,12,750 per 10 grams marks a turning point for investors, consumers, and policymakers alike. While it reflects global uncertainties and India’s vulnerability to external shocks, it also reaffirms gold’s timeless status as a safe-haven asset. For now, glittering headlines are likely to continue, but beneath the shine lies a cautionary tale: record prices can both enrich and burden, depending on which side of the trade one stands.