Gold prices hitting high globally, will the luster stay there long?

Gold, the yellow metal has been witnessing high for the past few days. The metal is utilized in the production of several electronic and medical devices in addition to being used as jewelry and as an investment. The price of gold as of March 7 stands at Rs 66,760 per kilogram in international markets. It is said that Central Bank Reserves hold currencies and gold in reserve and when they diversify the monetary reserves, the price of gold typically rises. 

There is a lot in play right now: Senior Market Strategist at a World Gold Council

According to a report, the Central banks are making a bigger bet on gold too, apart from Bitcoin, which is helping to push the metal further. As per data from the World Gold Council released Tuesday, Turkey, China, and India made sizable purchases, adding more than 30 metric tons to their reserves in January, which is among the reasons. “There is a lot in play right now, says Joe Cavatoni, senior market strategist for the Americas at the World Gold Council. “The geopolitical concerns have led to a more complex landscape and a broader case for gold,” he added.

However, there are several other reasons which accumulate.

Shifting expectations for interest rates

Traditionally, gold prices move inversely with interest rates. When interest rates are expected to fall, gold becomes more attractive to investors as it offers a potential hedge against inflation and a return on investment that doesn't rely on interest payments. In March, there have been signals that the US Federal Reserve may cut interest rates in June, leading to a surge in investor demand for gold.

Geopolitical uncertainty

Gold is seen as a safe-haven asset during times of international conflict. The ongoing Israel-Palestine conflict is just one example of geopolitical tensions that can drive investors toward gold, causing its price to rise.