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Gold prices in India increased on Thursday, according to FXStreet. The price per gram rose to 11,962.75 Indian Rupees from 11,876.92 INR the previous day. Gold per tola rose to 139,528.90 INR from 138,527.80 INR.
The ongoing US federal government shutdown extends into a third week, impacting economic performance. A Treasury official noted the shutdown could cost the US economy $15 billion weekly in lost output.
Escalating Trade Tensions
U.S.-China trade tensions are escalating, with both nations imposing fees this week. The US is considering terminating the cooking oil trade with China in retaliation for China’s actions.
US Defense Secretary warned Russia of costs if the Ukraine conflict continues. President Trump is also considering providing Ukraine with long-range missiles.
US Federal Reserve Chair signalled a 25-basis-point rate cut in October and December. The US Dollar’s declining trend is supporting Gold’s price increase.
Without major economic releases, speeches from FOMC members will influence USD demand and Gold price. FXStreet adapts international prices to the local currency for India. Prices are for reference and local rates may vary.
Safe Haven Assets Continue to Attract
Gold serves as a safe-haven asset during uncertain times. Central banks hold the most gold, with 1,136 tonnes added to reserves in 2022, the highest yearly purchase since records began.
Given the current flight to safety, we see gold’s recent push higher as a clear signal for the coming weeks. The combination of a dovish Federal Reserve and a weaker U.S. dollar is creating a powerful tailwind. This environment suggests that any dips in the gold price should be viewed as buying opportunities.
The Fed’s recent dovish tone is the most significant driver for us right now. After the central bank held interest rates at a 23-year high for much of 2024 to fight inflation, this pivot confirms that economic growth is now the primary concern. With the market fully pricing in rate cuts for both the upcoming October and December meetings, the path of least resistance for non-yielding gold is upward.
Geopolitical tensions are adding fuel to the fire, making safe-haven assets more attractive. The escalation in U.S.-China trade disputes and heightened rhetoric surrounding the war in Ukraine are not just background noise; they are actively pushing investors toward gold. We see these unresolved conflicts as a solid floor for gold prices through the end of the year.
The U.S. dollar’s sustained weakness is another critical factor. The Dollar Index (DXY) has fallen for three straight days, a trend we expect to continue as traders front-run the Fed’s rate cuts. As gold is priced in dollars, this currency headwind has now turned into a significant tailwind for the precious metal.
This momentum is supported by a strong underlying demand that we have been tracking for years. Looking back, we saw central banks add a record 1,037 tonnes of gold to their reserves in 2023, which followed the all-time high set in 2022. This consistent buying from major global institutions provides a strong fundamental backdrop for higher prices.
For derivative traders, this points toward using call options to capture further upside while managing risk. Long calls on gold futures or major gold ETFs offer a leveraged bet on prices continuing their record-setting run. We would also consider using VIX call options as a cheap hedge against any sudden spike in market volatility caused by geopolitical events.
