Why gold prices are fluctuating sharply this year

Gold prices have seen sharp fluctuations this year amid changing expectations on US interest rates, a stronger dollar and geopolitical tensions. HSBC expects the Federal Reserve may not raise rates as anticipated, while central bank buying and demand in India and China could support prices

Hyderabad: Gold prices have witnessed sharp fluctuations since the beginning of the year. At one point, the price rose to as high as $5,450 an ounce before falling to around $3,942 as market conditions changed.

The fluctuations have been driven by several factors, including tensions involving Iran, rising crude oil prices, a strengthening US dollar and higher bond yields. Expectations that the US Federal Reserve could raise interest rates further have also prompted investors to shift from gold to other assets.

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At present, the US Federal Reserve’s monetary policy decisions remain a key factor influencing gold prices. A rise in interest rates makes interest-bearing assets more attractive than gold, which does not generate interest income. This has contributed to the recent weakness in gold prices.

However, HSBC expects the Federal Reserve may not raise interest rates as anticipated. If the Fed keeps rates unchanged, investors could return to gold, potentially supporting prices.

Central bank purchases are another factor supporting gold prices. Central banks in several countries have been increasing their gold reserves amid heightened geopolitical tensions and uncertainty in the global economy, strengthening the metal’s appeal as a safe-haven asset.

Demand for gold also remains strong in India and China. The metal tends to attract investors as an alternative asset when stock markets come under pressure.