Gold prices soared for the fifth day in a row to a seven-month high on the back of a steady decline in the US dollar and bond yields. Investors gained confidence that the US Federal Reserve would cut rates by the first half of next year.

Spot gold in the US rose 0.2 per cent to $2,044.53 an ounce after hitting its highest since May 5. US gold futures for December delivery rose 0.3 per cent to $2,045.40 an ounce.

In India, yellow metal prices soared to ₹62,629 per 10 grams against ₹61,913 recorded on Tuesday, tracking the firm global trend, according to the Indian Bullion and Jewellers Association data.

On MCX, gold for December delivery increased to ₹62,475 per 10 grams from the previous close of ₹62,385.

Rising demand

Despite rising prices, gold jewellery demand has been increasing steadily, with gold imports touching a 31-month high of 123 tonnes last month. It surged 60 per cent compared to 77 tonnes registered in the same period last year.

Gold jewellery sales during this Dhanteras and festival season increased as gold prices softened, boosting investor sentiment. Domestic gold prices fell to their lowest level in 7 months at the start of October, providing an opportunity for jewellers to stock up for festivals.

‘Excercise caution’

Ajay Kumar, Director, Kedia Commodities, said amid the prevailing bullish sentiment, traders are advised to exercise caution, anticipating a potential $80-$100 price retracement in Comex gold prices following the $250 rally from $1820 to $2070.

The correction in the dollar index, dipping from 107 to 102.50, suggests possible profit booking in gold as the year-end approaches, he said, even while acknowledging the long-term bullish outlook for gold.

Rahul Kalantri, Vice President (Commodities), Mehta Equities, said, “With gold reaching a peak and silver hitting a three-month high, supported by a shift in the Federal Reserve’s tone towards a less-hawkish stance.”

The US dollar index descended to nearly a four-month low, accompanied by US 10-year bond yields slipping to a two-month low, he added.

The ongoing weakness in the dollar index and declining bond yields underpin gold and silver prices. Additionally, the prospect of a fall in US inflation in the coming months might create room for Federal Reserve rate cuts in 2024, potentially propelling gold prices to new all-time highs and pushing silver prices to test the $26 per troy ounce mark in the short term, he added.