Gold Prices to Surge Amid Middle East Crisis, Reports Suggest

Gold prices are set to rise by 9.9% this year due to the ongoing Middle East crisis, says Infomerics Ratings. Despite a reduced duty cut in India, geopolitical tensions, central bank buying, and demand during the festive season are driving prices up.

Gold prices are projected to increase by 9.9% this year, following last year's 10.2% surge, according to a report by Infomerics Ratings. The escalating conflict in the Middle East, particularly involving Iran and Israel, has led investors to turn to gold as a safe-haven asset.

The report highlights that while the rise in gold prices will be tempered by India's reduced import duty, historical trends show gold's resilience during global uncertainties. For instance, gold prices soared during the Russia-Ukraine war, reinforcing its role as a hedge against inflation and market instability.

Despite a recent mild correction, gold continues to be in high demand, driven by geopolitical conflicts and robust buying from central banks. The diversity of gold's uses, from jewelry to technology, ensures that various sectors drive demand at different times. Infomerics Ratings also noted that upcoming events like the US elections and potential Fed rate cuts could further impact prices.

The Union Budget presented on July 23, 2024, saw Finance Minister Nirmala Sitharaman reduce the import duty on gold from 15% to 6%, which led to a significant drop in gold prices across India. In Delhi, for example, the price of 10 grams of 24-carat gold fell to approximately Rs 69,140.

The report concludes that escalating geopolitical tensions, increased central bank purchases, and seasonal demands, particularly from weddings and festivals, will likely drive gold prices up in the current financial year. Additionally, the fragmented regulatory landscape in India poses challenges for stakeholders navigating the gold market.