Gold shines brighter, if Fed obliges

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₹65,140 per 10 grams on Tuesday. This comes after a strong US dollar and central bank tightening kept gold prices in a consolidation mode lately. Gold is a non-interest-bearing asset, so at a time when borrowing costs are higher, its attractiveness as an investment lessens.

But luckily for gold, in a liquidity-driven market and amid ongoing geopolitical tensions, risk-averse investors seem to be taking exposure in the safe-haven asset. Thus, protecting a steep downside in gold prices. In fact, gold is moving upwards even when its risker counterpart — equity markets have seen record high levels.

Theoretically, these assets tend to have an inverse co-relation. Central banks are said to have played an important role in buoying gold demand of late. “In the global gold ecosystem, central banks are the top players and they have been buying gold at a record pace, which is keeping the demand for gold intact.

Secondly, global gold miners are expected to incur more capex, aggregate trailing 12-months free cash flow is at record high, to meet this demand, which is a positive for prices," said Ankit Narshana, AVP, Nuvama Professional Clients Group. Global central banks’ gold reserves rose by 1,000 tonnes for the second successive year in 2023, showed World Gold Council (WGC) data. Central banks have been consistent net buyers on an annual basis since 2010, accumulating over 7,800 tonnes in that time, of which more than a quarter was bought in the last two years, said the WGC statement.