Gold prices are poised to extend their upward trajectory, driven by a renewed scramble for safe-haven assets amidst escalating global tensions. This outlook comes from Praveen Singh, Senior Fundamental Research Analyst for Currencies and Commodities at Mirae Asset Sharekhan, who highlights recent geopolitical events as a key catalyst for the precious metal's strength.
Geopolitical Storm Fuels Gold's Surge
Spot gold witnessed a powerful rally on Monday, January 5, climbing more than 2.5%. The surge was directly triggered by heightened geopolitical risks following the capture and removal of Venezuelan leader Maduro by US President Trump. This event sent shockwaves through markets, raising concerns that other nations with strained relations with the United States could face similar actions.
The metal soared to a one-week high of $4456 per ounce. At the time of reporting, spot gold was trading at $4445, marking a significant 2.65% gain for the day. On the domestic front, the MCX February gold contract mirrored the trend, rising 1.65% to Rs 137,997. This rally followed a sharp 4% decline in the week ending January 2, attributed to profit-booking and sell-offs linked to margin hikes.
Analysts view the Venezuela episode as a stark revival of the Monroe Doctrine, signaling Washington's firm stance on its sphere of influence in the Western Hemisphere. This has ignited fresh geopolitical concerns, particularly among countries with historically uneasy US ties, and is seen as a clear message to rivals like China and Russia.
Economic Data and Central Bank Watch
The macroeconomic landscape presents a mixed picture. In the United States, the ISM Manufacturing Index disappointed, falling to 47.90 in December from 48.20 in November, indicating a deeper-than-expected contraction—the worst since October 2025. Meanwhile, China's RatingDog PMI composite showed slight improvement, reaching 51.30 in December, supported by an encouraging Services Index reading of 52.
Market participants are now eyeing a slew of upcoming data. Key releases this week include US ISM Services Index and JOLTs job openings on January 7, followed by the crucial nonfarm payroll report and University of Michigan sentiment data on January 9. China will release its December PPI and CPI figures on January 9, along with updates on its forex and gold reserves. Eurozone Services PMI, CPI, and retail sales, alongside UK PMIs, are also on the deck.
On the monetary policy front, Federal Reserve Bank of Minneapolis President Neel Kashkari noted that interest rates may be nearing a neutral level, emphasizing a data-dependent approach for future actions.
Market Dynamics and Price Outlook
The US Dollar Index was trading slightly higher at 98.60, while Treasury yields edged lower. In the derivatives market, CFTC data reveals that investors are increasing their net long positions in commodities, notably gold, gasoline, copper, and silver.
Praveen Singh's analysis suggests spot gold is expected to continue its rally, supported by persistent safe-haven demand and central banks' potential moves to increase gold's share in their reserves. Key resistance is identified at $4472 and $4550, with support levels at $4393 and $4296. The preferred strategy remains buying on dips.
Risks to this outlook include potential margin hikes by the CME to curb speculation, commodity index rebalancing selling set to begin on January 8, and the impact of strong upcoming US economic data.
Silver Joins the Rally
The bullish sentiment spilled over into the silver market. Spot silver jumped over 5% on January 5, trading at $77.63—up around 7% for the day. The MCX March Silver contract rose 4.70% to Rs 247,455. Global silver ETF holdings remain elevated at 863.79 million ounces, the highest since June 2022. Silver may test resistance around $80-$81, with a surge to $85 possible if the US dollar weakens. Support is seen at $75, $73.36, and $72.50.
(Disclaimer: The recommendations and views expressed by experts are their own and do not represent the views of The Times of India.)
