Gold Prices on an Unstoppable Rally – Here’s Why
Gold prices have been on a relentless uptrend, gaining ₹9,500 per 10 grams in seven consecutive weeks on the Multi Commodity Exchange (MCX). This surge has been fueled by geopolitical tensions, trade war fears, a weakening US dollar, and US President Donald Trump’s aggressive tariff policies.
Since Trump’s inauguration as the 47th US President on December 20, 2024, gold prices have skyrocketed. MCX gold prices rose from ₹76,544 to ₹86,020 per 10 grams, recording a 1.57% gain last week alone. Meanwhile, in global markets, gold hit a fresh high of $2,954.94 per ounce.
What’s Driving Gold Prices Higher?
Gold’s rally is being attributed to several factors:
- Trump’s Tariff War: The US administration’s protectionist stance has raised concerns about global trade.
- Weak Dollar: A softer US Dollar Index (DXY) has made gold more attractive as an alternative asset.
- Geopolitical Uncertainty: Rising tensions across global economies have increased demand for safe-haven assets.
- Central Bank Buying: Major banks and financial institutions are hoarding gold.
- Gold Transfers from London to New York: The Bank of England’s gold vaults have seen a significant outflow to the US.
The Hidden Factor: London Vaults Emptying
A lesser-known but crucial factor behind the gold price rally is the massive gold transfer from the Bank of England to the US.
- JPMorgan Chase and HSBC have been shifting physical gold from London vaults to New York via commercial flights.
- NY COMEX vault stocks have surged by 20 million ounces in the past eight weeks, sparking concerns over a London Cash Gold Contract Default.
- Trump’s expected tariffs on gold imports from Europe have created a price disparity between US and European markets, leading to this large-scale transfer.
Expert Views on the Gold Shift
Sugandha Sachdeva, Founder of SS WealthStreet, explains:
“The tariff war between the US and Europe has created price disparities, prompting banks to move gold from London to New York. JPMorgan and HSBC have taken advantage of this by shifting gold reserves to capitalize on higher US prices.”
Anuj Gupta, Head of Commodities & Currency at HDFC Securities, adds:
“Beyond price arbitrage, banks are also seeking financial security amid rising global uncertainties. The fear of a London Cash Gold Contract Default has further intensified the safe-haven demand for gold.”
India’s Gold Reserves Are Rising Too
India is not far behind in this gold hoarding trend. The Reserve Bank of India (RBI) has shipped 202 tonnes of gold from the Bank of England’s vaults in the past year alone, bringing India’s total gold reserves to 855 tonnes.
What’s Next for Gold Prices?
With global economic uncertainties, inflation risks, and increasing central bank gold purchases, experts believe gold prices could continue their upward momentum. While Trump’s tariff policies have played a major role, the hidden factor of London’s gold outflow is adding fuel to this rally.
