Historic Rally: Gold Prices Set for Best Performance in Nearly Five Decades
Gold prices in India are scripting history this year, positioned to achieve their most impressive annual performance in 46 years since 1979. Following a remarkable 60% surge this year, the precious metal has been climbing higher for the fourth consecutive year, touching an unprecedented record of ₹1,32,294 on the Multi Commodity Exchange (MCX).
What's Driving the Gold Boom?
The spectacular rally finds its roots in multiple global factors. Former US President Donald Trump's tariff policies have significantly unsettled international markets, creating a favorable environment for safe-haven assets like gold. This uncertainty has prompted substantial central bank acquisitions worldwide and triggered interest rate reductions by the US Federal Reserve.
After experiencing a temporary decline, gold has regained its upward trajectory, with MCX prices climbing to ₹126,283, approaching previous peak levels. The renewed optimism stems from revived expectations of a Fed rate cut in December, with traders now estimating an 85% probability of monetary easing, a substantial increase from 50% just one week earlier.
Dr Ravi Singh, Chief Research Officer at Master Capital Services, explained: "Financial markets are currently more focused on the timing of policy relaxation rather than additional tightening measures. This perspective maintains pressure on real yields, which naturally benefits gold. Concurrently, geopolitical tensions remain elevated, sustaining background demand for safe-haven assets."
Multiple Factors Supporting Gold's Strength
Several interconnected elements are contributing to gold's robust performance:
- Geopolitical Uncertainty: Protracted Russia-Ukraine peace discussions and unpredictable US trade policies have kept global risk factors high.
- De-dollarization Trend: Central banks worldwide are diversifying reserves away from the US dollar. Last year witnessed central banks adding over 1,180 tonnes to their gold reserves. Although the acquisition pace has moderated this year due to record-high prices, Axis Direct projections indicate central banks remain on track to accumulate approximately 1,000 tonnes by year-end.
- Currency Fluctuations and ETF Inflows: Indian rupee volatility combined with consistent Exchange Traded Fund investments have provided additional support to gold prices.
Will the Bull Run Continue?
Market analysts remain optimistic about gold's prospects for the coming year, citing persistent global uncertainty alongside anticipated rate cuts. Dr Singh elaborated: "The global landscape hasn't transitioned to a low-risk environment. Inflation remains above comfortable levels, geopolitical situations continue to be complex, and growth visibility appears inconsistent. These conditions preserve long-term gold demand. While the pace of returns might decelerate following such a strong performance, the underlying upward trend appears intact."
He further noted that physical gold demand has demonstrated unexpected resilience despite elevated prices. From a technical perspective, MCX Gold maintaining levels above ₹100,000 has sustained bullish momentum, while breaching the ₹130,000 barrier strengthens the case for advancing toward ₹150,000 in the current market phase.
Axis Direct analysts anticipate another Fed rate cut in December, which could provide additional bullish impetus for gold. Technically, the commodity has demonstrated considerable strength, decisively breaking through the multi-month resistance zone between ₹1,01,500 and ₹1,06,000. This breakthrough received confirmation through expanding bullish candlestick patterns and robust trading volumes.
Following this breakout, gold exhibited powerful momentum, recently establishing a fresh lifetime peak near ₹1,32,000. The candlestick formation indicates aggressive purchasing during price dips, with no evident signals of trend exhaustion. However, analysts caution that the steep vertical ascent might necessitate short-term consolidation or a healthy correction.
Investment Strategy and Price Projections
Brokerage firm Axis Direct recommends traders accumulate gold during price declines within the ₹1,17,000 to ₹1,08,000 range, establishing an upward target of ₹1,40,000-1,45,000 by the conclusion of 2026.
Meanwhile, Dr Singh observed that MCX Gold has established a solid foundation near the 121,000-123,000 range, suggesting any price dips should be considered buying opportunities. "On the upper side, the 128,000-130,000 range represents significant resistance where selling pressure might emerge. Some market consolidation is healthy following substantial rallies, but structurally, gold continues to function as a portfolio hedge rather than a short-term trading instrument as we approach 2026," he added.
Potential Risks to the Gold Rally
Despite gold's compelling long-term narrative, the path forward might not be uniformly upward. Any significant strengthening of the US dollar or reversal in the Federal Reserve's accommodative stance could present challenges.
Dr Singh identified the primary risk: "The most significant threat would materialize if global growth unexpectedly accelerates, forcing central banks to maintain restrictive policies longer than markets anticipate. This scenario would elevate real interest rates and immediately alter gold's investment equation. Sustained US dollar recovery could also constrain upward movement."
From a technical standpoint, MCX Gold falling below ₹1,20,000 would signal early trend fatigue, with ₹1,08,000 representing the subsequent crucial support level.
Gold Prices Across Major Indian Cities
Here's a comparative overview of MCX and spot gold prices in key Indian metropolitan areas:
- Delhi: MCX: ₹126,042 | 24K Spot: ₹126,230 | 22K Spot: ₹115,711
- Mumbai: MCX: ₹126,042 | 24K Spot: ₹126,450 | 22K Spot: ₹115,913
- Bangalore: MCX: ₹126,042 | 24K Spot: ₹126,550 | 22K Spot: ₹116,004
- Chennai: MCX: ₹126,042 | 24K Spot: ₹126,810 | 22K Spot: ₹116,243
- Hyderabad: MCX: ₹126,042 | 24K Spot: ₹126,650 | 22K Spot: ₹116,096
- Kolkata: MCX: ₹126,042 | 24K Spot: ₹126,280 | 22K Spot: ₹115,757
Disclaimer: This educational content reflects views of individual analysts and brokerage firms, not Mint. Investors should consult certified experts before making investment decisions, as market conditions change rapidly and individual circumstances vary.
