Gold Prices Surge by 37% as Central Banks Ramp Up Purchases Amid Geopolitical Tensions

The bullion market is experiencing a notable surge in interest. Gold prices hit ₹86,360 per 10 grams in the futures market for the first time in February. This year, gold prices have climbed by about 11%, and over the past year, they have surged by 37%. Geopolitical tensions and continuous purchases by central banks are driving this gold boom. Commodity market experts anticipate that this bullish trend will persist, with expectations of rising gold prices in international markets. Brokerage firms like Goldman Sachs and UBS predict further increases.

Gold's upward trajectory continues on Comex, with spot gold reaching an all-time high of $2,942.70 per ounce on February 11. The demand for gold is steadily increasing as it remains a preferred safe investment option amid global economic uncertainties. The appeal of gold as a safe haven investment has grown due to American tariff policies. President Donald Trump has been assertive about tariffs since taking office.

Amidst growing global trade and economic tensions, central banks have ramped up their gold acquisitions. In 2024, India's central bank purchased 72.6 tonnes of gold, raising its reserves to 876.18 tonnes. Other countries like China, Poland, and Singapore are also actively buying gold. According to the World Gold Council (WGC), central bank gold purchases have increased for the third consecutive year in 2024, with over 1,000 tonnes bought last year. Poland's central bank led with 90 tonnes.

The WGC reports that China's central bank increased its gold holdings for the third consecutive month in January. Central banks in Poland and India also made significant purchases. This trend contributes to the continued rise in gold prices on Comex. Over the past 12 months, gold prices have risen by 44%, while global stock markets have only seen an 18% increase.

Donald Trump assumed office on January 20, 2025, and soon after signed orders imposing tariffs of 10-25% on imports from Mexico, Canada, and China. He later announced tariffs on steel and aluminum imports and approved reciprocal tariffs, sparking a trade war. In response to these American tariffs, China has imposed tariffs on American goods, with other countries preparing retaliatory measures.

Global brokerage firm Goldman Sachs recently updated its report on gold, revising its previous target to $3,100 per ounce for Comex gold by the end of 2025. This suggests that the price of gold in Indian rupees could reach ₹2.69 lakh (₹86.88/dollar). Previously, Goldman Sachs had set a target of $3,000 per ounce for Comex gold. The report indicates that central banks may continue purchasing due to inflation fears and fiscal risks, especially those holding significant US Treasury bonds. Additionally, ETF holdings might increase due to anticipated rate cuts by the US Fed.

Brokerage Firms' Predictions

Besides Goldman Sachs, other brokerage firms have also forecasted a rise in gold prices. UBS has set a target of $3,000 per ounce for Comex gold by the end of 2025. JPMorgan predicts a target of $3,019 per ounce, while Citi Research expects a target of $3,000 within the next 6-12 months.