In the recently published monthly review and outlook for gold, PersonalFN had highlighted that the rally in gold is expected to continue in the near term supported by a weaker US Dollar during the month, rising inflation expectations in the US, along with lower rates and geoeconomic uncertainty.
And indeed, gold prices continue to be on an unstoppable upward journey. The MCX spot price per 10 grams of gold touched a fresh record high of Rs 88,288 as of March 19, 2025. This marks the 3rd consecutive monthly gain for gold.
In 2025 so far, gold price has gained a staggering 16.3%, significantly outperforming other key asset classes such as equity and debt. This performance has been replicated across major currencies. Market experts are now of the view that gold at Rs 1 lakh may not be far off.
So, does the gold at all-time high levels makes it a case to buy more or book profits?
To understand that we need to first look at the factors that may drive the rally in gold in the near term:
Central Banks buying gold – Central bank are major players in the gold market and their gold purchases significantly influences gold prices. with increased demand from these institutions, including the RBI, has led to higher prices, as seen in recent years, where central banks have been accumulating gold reserves.
Economic uncertainty and trade wars – Uncertainty over the US trade tariffs and the resultant trade wars under Trump administration has given rise to safe haven demand for gold.
Geopolitical risks persisting – Lingering tensions in the Middle East, including Israel’s military operations in Gaza have contributed to gold’s return.
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Inflation concerns – US President Donald Trump’s protectionist measures are expected to fuel inflation. This along with adverse weather events pose a risk to inflation outlook prompting gold to reach multiple highs
Expectations of US rate cut and weakening dollar – Gold is highly sensitive to interest rate expectations and US dollar. If the US Federal reserve signals further rate cuts in the year, the US Dollar could weaken, boosting gold prices as lower rates reduce the opportunity cost of holding gold.
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