Gold prices surge to all-time high: Here’s why the safe-haven metal has been rallying

Gold has seen a rallying trend recently, with futures surging as much as ₹723 to jump to a lifetime high of ₹1,10,312 per 10 grams on the Multi-Commodity Exchange (MCX) on Tuesday, September 9.

On the MCX, the yellow metal futures for December delivery gained ₹723 or 0.65% to reach a record high of ₹1,10,312 per 10 grams. Furthermore, gold futures for October delivery also touched an unprecedented peak of ₹1,09,500 per 10 grams.

The October contracts for the safe-haven metal gained 3.76% over the past week and have advanced more than 5% since the beginning of September. On a year-to-date basis, the metal has steeply climbed nearly 38%.

In the overseas markets, Comex gold futures for December delivery rose to hit an all-time high of $3,694.75 per ounce.

Factors driving the gold rally

Gold is a safe-haven asset, which means investors turn towards it when global dynamics are uncertain and volatile. As the world becomes mired with tariff threats, a worsening US labour market, potential Fed rate cut, and geopolitical tensions, investors have been turning towards the yellow metal to hedge themselves against risks.

Let’s look at some of the factors bolstering the surge in gold prices and demand.

US labour market

Last Friday, the US Department of Labour released the non-farm payroll data, which measures the number of people employed during the previous month, excluding the farming industry. The report showed the unemployment rate hitting a four-year high of 4.3% in August, with US employers adding just 22,000 jobs during the month. In July, the country added 79,000 jobs.

Investors now look ahead to the US producer price data due on Wednesday and consumer price figures on Thursday for further direction on the Fed’s policy outlook.

Potential Fed rate cut

The increase in gold prices is also being led by a growing belief that the US Federal Reserve might cut interest rates at the upcoming Federal Open Market Committee (FOMC) meeting, which will take place between September 16 and 17.

The disappointing labour market data has also strengthened conviction among traders about the potential rate cut. Furthermore, the Fed Chair Jerome Powell hinted that the US central bank might cut interest rates during his speech at the Jackson Hole Symposium in August, where he said that a slowdown in the labour force growth, with the risk of inflation, may warrant the Fed to adjust its policy stance.

A lower bond yield if Fed cuts rate is also leading to surge in the price of yellow metal, analysts said.

US tariffs

The looming uncertainty caused by the 50% tariffs imposed by US President Donald Trump on all Indian goods and services in August is another factor causing gold prices to rise. However, a few weeks ago, a US appeals court upheld the decision that the reciprocal tariffs were unlawful. However, President Donald Trump has challenged the ruling in the Supreme Court. The hearing is currently ongoing.

Dollar index

The lower rates typically weigh on the dollar and bond yields, increasing the appeal of non-interest-bearing bullion. The dollar index declined to a nearly seven-week low against peers, which has resulted in an increase in gold demand from holders of other currencies. Furthermore, the benchmark US 10-year Treasury yield slipped to a five-month low.

Fresh US sanctions against Russia

The prospect of fresh US sanctions against Russia, following a retaliatory strike by Moscow against Ukraine, also fuelled the safe-haven demand.

Central bank buying gold

Central Banks across the world have been raising their gold reserves as countries take a step away from the US dollar. While central banks slowed down their purchase to a modest 10 tons of global gold reserves in July, they continued to be net buyers of gold even in the current price range, according to the World Gold Council. In May, however, the banks increased their gold reserves by a net of 20 tons. Furthermore, the yellow metal stands right after the US dollar as a reserve asset.

Festive demand

With the festive season knocking at the door, demand for gold in the domestic market has been surging, as the metal carries cultural, traditional, and religious values in India. The surge in demand has taken gold prices up with it, analyst added.