Gold has rebounded from its recent losses following a surge of geopolitical unrest, driven by escalating tensions in the Russia-Ukraine war. The catalyst for the surge in gold prices came on November 19, when Ukraine launched long-range, U.S.-made ballistic missiles deep into Russian territory, heightening fears in Western capitals that Moscow could escalate to nuclear warfare in response.
The missile strike occurred on the same day that Russian President Vladimir Putin issued a chilling warning, lowering Russia’s threshold for the use of nuclear weapons. He specifically referenced the possibility of a nuclear retaliation if NATO were to supply further tactical weapons to Ukraine or its ally Belarus. This development has added another layer of uncertainty to the already volatile situation, fueling concerns that the conflict could escalate to catastrophic levels.
In the months leading up to the recent U.S. presidential election, gold prices had surged to record highs, reaching over $2,750 per ounce. However, when it became clear that Donald Trump was poised for a strong return to the White House, gold prices plummeted, losing more than 6% of their value. The renewed flare-up in the Russia-Ukraine war has since reversed much of that decline, with gold recovering approximately half of the losses.
Domestically, the wedding season in India is seeing a boom, with 18 highly auspicious days contributing to a sharp increase in marriages this year. An estimated 4.8 million marriages are expected, up from 3.5 million in 2023. This spike in weddings is expected to generate a staggering Rs 6 lakh crore in total spending, a significant jump from last year’s Rs 4.25 lakh crore. Notably, 15% of this spending is expected to be directed towards jewellery, which traditionally drives gold demand.
According to S Abdul Nazar, National Director at the All India Gem and Jewellery Domestic Council, “Gold prices have shifted towards a safe-haven demand following a substantial weekly decline and a six-day losing streak. This shift was further bolstered by falling U.S. Treasury bond yields, prompting profit-taking in the dollar, which has benefited gold.”
With geopolitical tensions at a high and a robust domestic demand, gold is once again becoming a favored investment, and experts anticipate that prices may continue to climb in the coming weeks.
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