Gold prices in India surged to Rs 87,060 per 10 grams on Friday, February 14, 2025, with Delhi's 24K gold hitting Rs 87,210 and 22K gold at Rs 79,960. This increase was driven by a weaker US dollar and strong local demand. Globally, spot gold remained stable at $2,929.05 per ounce, extending its seven-week winning streak as of 0303 GMT.
The current surge in gold prices comes amidst concerns of a potential global trade conflict following US President Donald Trump's announcement of reciprocal tariffs on countries imposing taxes on US imports. Analysts believe that the tariff announcements have contributed to the rise in gold prices, heightening fears of a trade war impacting major economies.
Why the surge
Recent economic data in the US has shown a significant increase in the producer price index for January, following a report of the fastest consumer price rise in nearly 18 months. These signals point to a quickening pace of inflation, reinforcing the belief that the Federal Reserve will maintain current interest rates until the latter half of the year.
Historically, investors have turned to gold as a safe haven against inflation and economic uncertainty. However, the rise in interest rates can diminish its attractiveness as a non-yielding asset. Additionally, the increase in global gold prices has affected jewelry sales during India's wedding season, with dealers in China offering discounts to entice buyers.
"Gold is likely to trade steady to positive as trader’s/ market participants take pause and look for fresh cues with most of the uncertainty related to the trade tariffs and its impact seems already priced in. The bullion remains supported by weakness in the U.S. dollar, which is down nearly 1% so far in the week. Silver is likely to outperform gold in the near term, as a rally in industrial metals is likely to support prices. Technically, momentum in gold remains positive with support at 85900/ 85650, upside potential looks like 86900/ 87450," said Pranav Mer, Vice President, EBG - Commodity & Currency Research, JM Financial Services.
ICICI Securities noted: "Global trade war concerns have resurfaced after China retaliated with tariffs on the US. Further, increasing gold reserves for the second consecutive month by China’s central bank also fuelled the rally in precious metals."
What lies ahead
Analysts project that gold prices will continue to be high in 2025, with a possibility of reaching $3,000 per ounce. The demand for gold as a safeguard against economic risks is expected to be bolstered by factors like geopolitical uncertainties and assertive trade policies.