Ahmedabad: The city's gold market is witnessing remarkable fluctuations as prices soar to record levels, hitting ₹85,000 per 10 grams on Friday, January 31, 2025. Within just 24 hours, the price jumped by ₹1,000, reflecting global movements as anxiety grows over geopolitical tensions and economic uncertainties. Internationally, gold prices reached approximately $2,800 per troy ounce, primarily driven by tariff threats and speculation surrounding potential actions from the US Federal Reserve.
Haresh Acharya, the director of the India Bullion and Jewellers' Association (IBJA), commented on the current dynamics of the market, stating, "The steep rise could dampen domestic demand, especially with the wedding season ahead." Analysts are attributing this sudden spike to the intensifying tariff conflicts between nations. Acharya elaborated, "The US reaffirmed its stance on imposing up to 25% duties on imports from Mexico and Canada, and additional tariffs on Chinese goods remain under consideration. During times of economic and geopolitical instability, investors flock to bullion, leading to higher prices."
Gold's allure as a safe-haven asset has grown significantly amid fluctuated markets. On the same day, spot gold prices stabilized at $2,795.52 per ounce, slightly down from earlier highs of $2,800.99. The rising prices represent more than 6% growth for the month and approximately 1% increase for the week. Nitesh Shah, commodities strategist at WisdomTree, stated, "The rally could hold for as long as there is uncertainty in the market. Much of today's uncertainty stems from not knowing whether and how tariffs will be applied." The unpredictability around tariffs imposed by the US has surrounded traders and investors, creating hesitancy.
Commentators across the board are highlighting the effect of these economic factors on gold's ascent. Carsten Menke, from Julius Baer, pointed out, "We see central bank buying as the strongest structural force in the gold market, underpinning our long-term constructive view." Commentators have noted significant central bank purchases globally, signaling confidence and long-term investment strategy changes.
Despite the upward momentum for gold prices, the anticipated domestic demand from India may experience limitations, particularly with the wedding season approaching—a period when gold sales typically surge dramatically. The high cost per gram could serve as a deterrent for many consumers. Analysts suggest potential buyers may be waiting for the upcoming federal budget, scheduled for February 1. High prices are forcing many to reconsider their purchase plans, which could affect the overall jewelry market leading up to festivities.
Market focus is shifting toward the forthcoming December US personal consumption expenditures price index report, due later today. This report is the Federal Reserve's favored measure of inflation, and comments from Fed Chair Jerome Powell indicated the importance of inflation data for any future easing of monetary policy. If inflation persists with weaker economic growth, Ricardo Evangelista, senior analyst at ActivTrades, proposes this backdrop could make the $3,000 mark for gold look plausible. Evangelista opined, "If the combination of high inflation and sluggish growth occurs, then the $3,000 level will appear increasingly plausible." This assessment points to future volatility and the left flank of potential market adjustments.
High gold prices have also influenced the market for other metals, creating additional fluctuations. Silver prices fell slightly, by 0.2%, settling at $31.62 per ounce, after having reached over one-month highs earlier. Platinum, on the other hand, firmed up by 1.2%, reaching $978.55 per ounce, whereas palladium saw minor declines, down 0.3% to $986.50.
The sudden surge and current upheaval within the gold market epitomize how feasible geopolitical shifts and economic policy decisions can influence the trading environment. The intertwining of current events with investors' strategies demonstrates just how volatile precious metals can be.