• 24-carat peaks at Rs. 300,000 per 8 g before slight correction
• Global demand led by central banks fuels price rally
• Fed rate cut expectations add momentum to gold’s upward trend

Gold prices in the local market hit a record high of Rs. 300,000 on Wednesday (10) before dipping slightly, market sources reveal.

Speaking to The Sunday Morning Business, Ramzan Haneef from Cash For Gold Ltd. stated that over the past two weeks, the price of gold in the local market had surged by around Rs. 15,000 in reaction to the movements in the world market.

He further revealed that local gold prices had reached a historic high of Rs. 300,000 for 24-carat 8 g (1 sovereign) on Wednesday (10), whilst the 22-carat 8 g (1 sovereign) had reached around Rs. 275,000. 

He noted that by Thursday, “gold prices have fallen a bit,” with the local market prices for 22-carat 8 g (1 sovereign) being around Rs. 272,000 while the 24 carat 8 g (1 sovereign) was at Rs. 297,000.

Speaking to The Sunday Morning Business, Frontier Research Head of Macroeconomic Advisory Chayu Damsinghe pointed out that the recent surge in gold prices had largely been driven by increased demand for gold from institutions, funds, and other investors as a hedge against inflation and a potential economic recession.

He noted that increased gold purchases by central banks, particularly the Chinese central bank, had played a major role in driving gold prices upward.

“Central banks, in particular the Chinese central bank, have been buying a lot of gold. The biggest purchaser of gold has been the Chinese central bank, which has purchased a lot of gold as part of its balance sheet,” he stated.

Damsinghe clarified that the recent rise in prices from around $ 3,600 to $ 3,700 had been largely driven by market expectations of a US Federal Reserve rate cut.

“When you cut rates you will have a long-term weakening of the US Dollar. The idea is that when you cut rates, there is less reason for someone to invest in the US market. Therefore, people will take money out of the US, which will weaken the US Dollar. Since gold is priced in US Dollars, the dollar value of gold will go up.”

According to Reuters, the CME FedWatch tool showed that markets are pricing in a 90% probability of a quarter-point cut at the Fed’s 16-17 September meeting, with slim odds on a larger cut.

Speaking to Reuters, ActivTrades Senior Analyst Ricardo Evangelista stated: “The $ 3,750 mark is emerging as the next significant resistance, and a consolidation above it could see the precious metal approach $ 3,900 by year-end.”