Gold rates on the rise amid geopolitical instability. Good time to buy?

Gold prices have been on the rise recently, and many investors are wondering if now is the right time to invest in the precious metal.

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

In the last two days, gold prices have increased by Rs 800 per 10 grams, while silver has seen a rise of Rs 700 per kilogram. This uptick comes as gold remains steady near its record levels.

“Gold prices are seen consolidating previous session gains amid caution ahead of the important US inflation data that could set the tone for the Fed’s policy meeting early next month ” said Pranav Mer, Vice President, EBG – Commodity & Currency Research, JM Financial Services Ltd.

Traders are keeping a close eye on rising tensions in the Middle East and upcoming US inflation reports, which could impact the Federal Reserve’s decision on interest rates.

During Asian trading hours, the price of gold was around $2,470 an ounce after a 1.7% increase on Monday. This rise is attributed to increased demand for safe-haven assets amid fears of a potential conflict between Iran and Israel, which could escalate into a larger regional dispute.

Markets are also waiting for the US Consumer Price Index (CPI) report, due on Wednesday, which is expected to show a slight rise in prices for July, but at a slower annual rate. Investors are eager to see if this data will influence the Federal Reserve’s approach to managing inflation without causing a recession.

Dr Renisha Chainani, Head Research at Augmont – Gold For All, said, “Gold prices jumped 1% towards a record high amid risk-off sentiment. Recent statements from a White House spokesperson suggest that Iran might strike Israel this week, potentially disrupting peace talks.”

She further added that investors are also anticipating US inflation data to gauge if the Federal Reserve will raise interest rates, especially following a disappointing employment report that has increased concerns about a recession and bets on rate cuts.

“The upcoming US Producer Price Index (PPI) and CPI reports could offer new insights on the Fed’s policy direction. Gold continues its upward trend and is expected to hit new highs above $2,500 (Rs 71,000),” said Chainani.

Prathamesh Mallya, DVP- Research at Angel One Ltd, said, “Gold prices surged over 1% on Monday, reaching their highest level since August 2. This increase was 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, along with a surprising Ukrainian military advance into Russia’s Kursk region, has heightened fears of wider regional conflicts involving Iran and its allies.”

Sharing the outlook for gold he said, “Gold prices are expected to remain strong, driven by heightened geopolitical tensions and anticipation of key U.S. inflation data that could influence the Federal Reserve’s rate decisions.”

“Gold is attracting attention as a traditional hedge against geopolitical instability and economic uncertainty, particularly as lower interest rates tend to boost the appeal of non-yielding assets like bullion. Gold prices are expected to remain strong, driven by heightened geopolitical tensions and anticipation of key U.S. inflation data that could influence the Federal Reserve’s rate decisions,” said Saish Sandeep Sawant Dessai, Analyst, Angel One.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)