Precious metals markets in India witnessed a historic rally on Monday, with gold and silver futures contracts soaring to unprecedented levels. The surge is primarily attributed to growing market speculation about imminent interest rate cuts by the US Federal Reserve and a concurrent weakening of the American dollar.
Record-Breaking Rally on the Multi Commodity Exchange
On the domestic trading platform, the Multi Commodity Exchange (MCX), the most significant gains were seen in gold contracts. Specifically, gold futures slated for February delivery experienced a sharp upward movement. The contract price escalated by a substantial Rs 1,628, which translates to a gain of 1.21 per cent. This propelled the price to a new all-time high of Rs 1,35,824 for every 10 grams. This milestone was recorded on 22 December 2025.
Key Drivers Behind the Precious Metals Boom
The rally is not occurring in isolation but is fueled by powerful global macroeconomic factors. The primary catalyst is the mounting anticipation that the US Federal Reserve will begin reducing its benchmark interest rates in the coming months. Lower interest rates in the United States diminish the opportunity cost of holding non-yielding assets like gold, making them more attractive to investors. Simultaneously, the expectation of a dovish Fed policy has put pressure on the US dollar. A weaker dollar makes dollar-denominated commodities, including gold and silver, cheaper for holders of other currencies, thereby boosting international demand and prices.
Silver futures, often more volatile than gold, also participated vigorously in this bullish trend, hitting fresh multi-year peaks alongside gold. The synchronized rise indicates a broad-based investor shift towards safe-haven and tangible assets amid the shifting monetary policy landscape.
Implications for Investors and the Market
The record-setting prices have significant implications for various market participants. For retail investors and households in India, a major consumer of physical gold, this translates to higher costs for jewellery and investment bars. For traders and portfolio managers, the trend underscores a strategic move into assets that traditionally perform well during periods of monetary easing and currency weakness.
Analysts suggest that the current momentum may sustain in the near term, contingent on further cues from the Federal Reserve and the trajectory of the dollar index. However, they also caution that profit-taking at these elevated levels could lead to increased volatility. Market watchers will closely monitor upcoming US economic data and official statements from the Fed for direction, as these will be critical in determining whether the rally has more room to run or is due for a consolidation phase.
