Gold prices on the Multi Commodity Exchange (MCX) have reached a new record high today, fueled by a weakening US dollar and persistent uncertainty surrounding the global trade scenario. This surge in the yellow metal is prompting investors to reassess their strategies in the current economic climate.
In early trading hours on Monday, MCX Gold for June 5 contract soared to an unprecedented ₹96,747 per 10 grams. This upward trajectory mirrors the international spot gold prices, which also touched a record high of $3,384 per ounce during the session. The primary drivers behind this rally are the increasing concerns over the economic repercussions of the ongoing trade tensions, particularly between the United States and China, and the marked weakness in the US dollar against other major currencies.
The dollar index, a measure of the dollar’s strength against a basket of six major currencies, has plummeted to a three-year low. This decline makes dollar-denominated assets like gold more attractive to investors holding other currencies, thereby boosting demand and prices. Gold is typically priced in US dollars, so a weaker dollar translates to lower costs for buyers using other currencies.
Despite a brief dip in the previous session due to profit-taking, the underlying anxieties about a protracted trade war have reignited buying interest in gold as a safe-haven asset. While US President Donald Trump recently indicated a pause on reciprocal tariffs, his overall stance towards China remains firm, keeping fears of an escalating trade conflict alive. The potential for a significant trade war between the world’s two largest economies raises concerns about a slowdown in global economic growth, further bolstering gold’s appeal as a store of value during turbulent times.
Adding to the market jitters is the uncertainty surrounding the US Federal Reserve’s independence. Recent reports suggest that President Trump and his team are still considering the removal of Federal Reserve Chair Jerome Powell. Such a move could potentially destabilize global financial markets and further support safe-haven assets like gold.
What should investors do?
Given the current volatility and the factors driving gold prices, experts suggest a cautious approach for investors.
Manoj Kumar Jain of Prithvifinmart Commodity Research advises investors to refrain from taking fresh positions in gold and silver due to the speculative nature of US-China trade deal negotiations and the fluctuating dollar index. He notes that MCX Gold has support levels at ₹94,750-94,280 and resistance at ₹95,550-96,000 for today’s trading session.
Renisha Chainani, Head of Research at Augmont, points out that while strong demand and economic uncertainties are driving gold’s ascent, a stronger US dollar, higher interest rates, or easing geopolitical tensions could halt this rise. She suggests that investors who are overexposed to gold might consider booking partial profits. For those with limited exposure, gradual accumulation might be a favorable strategy, keeping in mind their portfolio composition and risk tolerance.
In conclusion, the record-high gold prices on MCX are a direct consequence of global economic uncertainties, particularly the US-China trade war, and the weakening dollar. Investors should remain vigilant and consider the advice of financial experts to navigate this volatile market effectively.
