Gold prices climb amid geopolitical tensions: Is it a good time to buy?

PTC News Desk: Gold prices have recently been rising, prompting many investors to consider whether it’s the right time to invest in the precious metal.

On Tuesday, October gold futures on the Multi Commodity Exchange (MCX) opened at Rs 70,679 per 10 grams, showing a slight dip of 0.08% or Rs 59. In contrast, September silver futures were trading at Rs 81,237 per kilogram, down by 0.47% or Rs 387.

Over the past two days, gold prices have increased by Rs 800 per 10 grams, while silver has risen by Rs 700 per kilogram, maintaining steady levels close to record highs.

Traders are closely monitoring escalating tensions in the Middle East and upcoming US inflation reports, as these could influence the Federal Reserve’s interest rate decisions.

During Asian trading hours, gold was priced around $2,470 an ounce, reflecting a 1.7% increase from Monday. This rise is largely driven by heightened demand for safe-haven assets amid concerns about a potential conflict between Iran and Israel.

Investors are also awaiting the US Consumer Price Index (CPI) report, scheduled for Wednesday, which is expected to show a modest rise in July prices but at a slower annual rate. This data might impact the Federal Reserve’s approach to managing inflation without triggering a recession.

Dr. Renisha Chainani, Head of Research at Augmont – Gold For All, noted, “Gold prices have risen 1% towards a record high due to risk-off sentiment. Recent comments from a White House spokesperson suggest that Iran might strike Israel this week, which could disrupt peace talks.”

Chainani added that investors are also waiting for US inflation data to see if the Federal Reserve will raise interest rates, especially after a disappointing employment report that has raised recession concerns and speculation about rate cuts.

“The upcoming US Producer Price Index (PPI) and CPI reports could provide further insights into the Fed’s policy direction. Gold’s upward trend is expected to continue, potentially surpassing $2,500 (Rs 71,000),” Chainani said.

Prathamesh Mallya, DVP- Research at Angel One Ltd, commented, “Gold prices surged over 1% on Monday, reaching their highest level since August 2. This increase is driven by safe-haven demand amid global geopolitical tensions and anticipation of key US inflation data. The ongoing conflict between Israeli forces and militants near Gaza, coupled with a surprising Ukrainian military advance into Russia’s Kursk region, has heightened fears of broader regional conflicts involving Iran and its allies.”

Mallya added that gold prices are expected to remain strong due to ongoing geopolitical tensions and the anticipation of crucial US inflation data that could influence Federal Reserve rate decisions.

Saish Sandeep Sawant Dessai, Analyst at Angel One, concluded, “Gold is gaining attention as a traditional hedge against geopolitical instability and economic uncertainty. Lower interest rates often enhance the appeal of non-yielding assets like gold. The metal’s strength is expected to continue, driven by heightened geopolitical tensions and the anticipation of US inflation data that could affect the Federal Reserve’s rate decisions.”