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Gold hits another all-time high, marks its strongest week in 5 years. Bright path ahead or in for a bumpy ride?

Gold extended its blistering rally on Friday, October 17, smashing past the $4,300 mark on COMEX and notching its strongest weekly gain since 2020. Spot gold climbed 0.3% to $4,336 per ounce as of 0233 GMT, after touching a session peak of $4,379.

Domestically, gold futures on the Multi-Commodity Exchange (MCX) followed suit, with the December contract jumping to Rs 1,32,294 per 10 grams, its highest ever level on the Indian exchange.

The MCX December contract was last trading at Rs 1,31,878, up Rs 2,026 or 1.56% for the day. With this, gold December futures on MCX have climbed 12.8% so far in October, rising from the closing price of Rs 1,17,265 on September 30.

A landmark year: Over 50% YTD gains, dozens of record highs

Domestic research firm Motilal Oswal Financial Services Ltd (MOFSL), in its latest press release, described the rally as a “rare and spectacular ascent” that has pushed gold beyond $4,000 on COMEX and Rs 1,20,000 domestically.

The firm noted that gold has already registered over 35 new record highs this year and surged more than 50% year-to-date across exchanges.Manav Modi, Analyst, Commodities & Currencies at Motilal Oswal, attributed the metal’s strength to a mix of global and structural shifts, saying: “Gold’s stellar rally reflects a confluence of macro shifts — from fiscal uncertainty and softer dollar to strategic diversification by central banks. Asia is emerging as the epicentre of this new monetary alignment.”

What’s fueling gold’s meteoric rally?

  • Weakening US Dollar: The US Dollar Index slipping below 100 has made gold more attractive to global investors.
  • Fed Rate Cut Expectations: The Market anticipates interest rate cuts by the Federal Reserve, boosting non-yielding assets like gold.
  • Rupee Appreciation: A stronger rupee supports domestic gold prices by improving import affordability.
  • Central Bank Buying: Continued robust demand from central banks, especially in Asia, with China emerging as a key gold accumulator.
  • Geopolitical Uncertainty: Rising global tensions have renewed safe-haven demand for gold.
  • Institutional Interest: Increasing allocations from large investors viewing gold as a long-term strategic hedge.
  • Sovereign Diversification: Nations are diversifying away from the dollar by increasing gold reserves.
  • Structural Rally: Analysts call it a “rare and structural” bull run rather than a speculative surge.

Navneet Damani, Head of Research – Commodities & Currencies, Motilal Oswal Financial Services Ltd., emphasised the role of central banks, stating: “Central bank diversification is redefining the bullion market. For the first time, institutional demand and sovereign accumulation are aligned with long-term value creation.”

Can the rally sustain beyond Rs 1.35 lakh?

MOFSL’s Samvat 2082 commodities report points to continued bullishness, projecting gold prices to trade between $4,250 and $4,500 on COMEX and between Rs 1,28,500 and Rs 1,35,000 domestically (assuming USDINR at 89).

Commenting on the outlook, Manav Modi and Navneet Damani said, “We have achieved our target for Gold on both COMEX and the domestic front at $4,000 and Rs 1,20,000, respectively. While bouts of correction may emerge, persistence above the all-time highs could take prices towards $4,250–$4,500 on COMEX and, assuming USDINR at 89, Rs 1,28,500–Rs 1,35,000 on the domestic front from a medium- to long-term perspective.”

The analysts also flagged macroeconomic supports, including policy uncertainty, strong central bank buying, ETF inflows, and continued currency diversification, as key drivers going forward.

Also read: Silver’s great disconnect: MCX prices soar but ETFs crash 8%. What’s really happening?

As India heads into the Diwali season, seasonal buying trends and cultural sentiment are also expected to play a role. MOFSL notes that prices in India have historically risen in seven of the past ten Diwali seasons, with pre-Diwali gains often outpacing post-festival trends.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)