Notwithstanding weak demand, gold prices continued to soar to hit a new high ahead of the peak festival and wedding seasons on the back of a sharp rally in the global markets.

The yellow metal used in jewellery rallied by ₹1,397 per 10 grams to ₹71,279 on Monday and crossed the ₹70,000 mark in the spot market for the first time, according to the Indian Bullion and Jewellers Association of India data.

In MCX, gold for June delivery contracts surged by ₹440 per 10 grams to ₹71,080 on expectation of further rise in prices due to global geopolitical developments.

Inverse relation

Spot gold in the Chicago Mercantile Exchange soared to $2,344 per ounce, while US gold futures climbed to $2,361 despite expectations of US Federal Reserve delaying the interest rate cuts on back of robust growth US job data.

The US interest rate and gold prices are inversely related. If the interest rate is reduced, gold prices will go up.

Sachin Jain, Regional CEO, India, World Gold Council, said with the gold prices touching a historic high the demand was near stagnant due to a fall in jewellery demand in the March quarter in both rural and urban centres as per anecdotal feedback from the jewellers.

Demand to be subdued

Usually, he said consumer gold demand moves up with the start of the festive season from Gudi Padwa, Ugadi, Chaitra Navratri and Ramzan Eid in April and in the last few days the industry has reported good pre-bookings for festivals.

With the restrictions on gold movement over the next two months due to the General election, he said gold jewellery demand will remain subdued in the June quarter, even if prices moderate in coming months.

Meanwhile, central banks across the globe have been buying gold as part of their forex reserve management. RBI bought 8.7 tonnes of gold in January alone, which was the highest in two years. The central bank’s gold holdings had touched 812 tonnes as of January-end, as per the World Gold Council.

The value of gold in the forex reserves was at $51 billion as of March, which was $6 billion higher than the value logged in March, 2023. The overall forex reserves have touched an all-time high of $646 billion as of March-end, said RBI.

Meanwhile, China’s central bank purchased gold for 17th consecutive month in March. The People’s Bank of China’s gold holding was up 0.2 per cent to 73 million troy ounces, the smallest increase since November 2022. China has foreign exchange reserves of $3.25 trillion. Incidentally, China is also one of the largest gold producers.