Silver Hits Record ₹3,54,780 as Gold Reaches New Peak

On January 27, the price of silver on the MCX jumped  6% to ₹3,54,780 per kilogram, setting a new record high and gold increased by 2.5% to ₹1,59,820 per 10 grams.

The weakening of the U.S. dollar, along with increasing global geopolitical uncertainty, has caused investors to buy into the safety of precious metals.

Today, Spot Gold rose by 1% to $5,065 per ounce after reaching a prior high of $5,110, and spot Silver was up 5.2% to $109 per ounce near prior all-time highs.

The increased levels of investment in both precious metals are reflective of the increased levels of global uncertainty.

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Trade Tensions Fuel Safe-Haven Rush

An example of the type of issues investors face is President Donald Trump's announcement that he would implement a 25% tariff on South Korean automobile, timber, and pharmaceutical imports. This announcement follows Trump's announcement of possible 100% duties on Canada because of its relations with China.

These two announcements are further examples of increasing fears of a trade war, as seen in previous announcements regarding Greenland from Europe. Investors feel the need to protect themselves from these economic disruptions by investing in hard assets.

The increase in the value of commodities purchased in U.S. dollars due to weak dollar prices has contributed to the demand for precious metals.

Fed Uncertainty Adds Momentum

Market consensus is that Federal Reserve policy will maintain the status quo of rates when they meet on 27th to 28th January, yet speculation continues with respect to Governor Jerome Powell's potential criminal investigations and any future appointee nominated in the month of May.

Media reports on attempts to oust Ms Cook have created increasing uncertainty regarding Federal Reserve (Fed) independence. The potential for global currency depreciation due to government action, along with continuing world demand (especially during a time of uncertainty), is raising interest in investing in precious metals.

Silver has been more influenced by both reflationary bet syndications and safe-haven flows than gold has, and this has resulted in the formation of trading opportunities in silver over this period of time.

Domestic and Global Context

Both the domestic and global contexts of rupee valuation being at/or just above historical lows, together with the increase in price of gold, provide strong indications of investment gains for gold.

The current Federal Reserve meeting, providing information/decisions in the coming weeks, will directly influence the immediate future of both gold and silver as demand continues due to continued geopolitical uncertainties and upcoming monetary policy decisions.