The price of gold has surged to unprecedented levels in India, crossing the ₹1 lakh mark on the Multi Commodity Exchange (MCX). This surge is primarily attributed to escalating tensions between Israel and Iran, which have increased demand for safe-haven assets. Here's a detailed look at the factors driving this price rally and what it means for investors and consumers.

Geopolitical Tensions and Safe-Haven Demand

The primary driver behind the recent surge in gold prices is the escalating geopolitical tensions between Israel and Iran. Recent attacks on nuclear facilities have heightened concerns about a wider regional conflict, prompting investors to seek refuge in safe-haven assets like gold. Gold has historically been a preferred investment during periods of geopolitical instability because it tends to retain its value even when other assets, such as equities and currencies, become volatile. As the situation develops, the potential impact on gold prices could be substantial, especially if the conflict escalates into a full-scale war. Experts predict that in the event of a full-scale conflict between Israel and Iran, gold prices could surge beyond their previous highs.

Global Market Performance

The surge in domestic gold prices mirrors trends in the international markets, where gold has surpassed $3,400 per troy ounce. The rise in international gold futures to a record high further amplified the increase in India. Uncertainty in global financial markets and an escalating US-China trade war were key drivers, increasing the safe-haven appeal of precious metals. Instability in the U.S. dollar, which slipped to 3-year lows following disagreements between the U.S. President and the Federal Reserve Chairman over interest rate cuts, further boosted gold.

Factors Influencing Gold Rates in India

Several factors influence gold rates in India, including:

• Global Market Trends: Gold prices in India depend on global market trends. Any changes in international rates directly affect the gold price in the country. Factors like inflation, geopolitical tensions, and economic stability influence global gold rates.
• Rupee vs. US Dollar Exchange Rate: Gold is traded globally in US dollars. If the Indian rupee weakens against the dollar, importing gold becomes costlier, leading to a price hike.
• Government Regulations and RBI Policies: Policies related to gold reserves, restrictions on gold imports, and changes in investment schemes like Sovereign Gold Bonds affect prices. Import duties and taxation policies impact the gold price in India. If the government increases import duties, gold prices rise.
• Seasonal Demand and Cultural Factors: Certain times of the year see higher demand, which pushes prices up. Festivals like Diwali and Akshaya Tritiya are considered auspicious for gold purchases, and the wedding season sees higher demand.

Impact of GST and Physical Market Prices

In the physical market, excluding the 3% Goods and Services Tax (GST), the price of gold was trading at ₹97,200 per 10 grams. However, including GST, gold prices exceeded the ₹1 lakh mark at the retail level.

Expert Advice and Market Outlook

While the trend looks strong, experts say it's better to stay careful. The prices are already quite high, and there could be short-term ups and downs. If you're planning to buy, it might be smarter to do it in small parts rather than all at once.

Silver Market Overview

Alongside gold, silver May futures contracts on the MCX also opened higher. Silver futures had settled with a gain in the previous trading session.

Conclusion

The crossing of the ₹1 lakh mark for gold prices on MCX is a significant event driven by a confluence of factors, most notably the escalating tensions between Israel and Iran. While gold is considered a safe investment during times of uncertainty, experts advise caution due to the already high prices and potential for short-term volatility.