Gold and silver prices kept heir sizzling rally alive on Monday, driven by speculative trading and ongoing geopolitical tensions in the Middle East.

What Happened: Spot gold rose by 0.42% to $2,339.60 per ounce, reaching a peak of $2,353.79 earlier in the session. US gold futures also climbed by 0.53% to $2,357.80.

Meanwhile, silver prices reached a three-year high globally, hovering around $28 per ounce. In India, silver prices hit an all-time high near ₹82,000 per kilogram, rising by 11% over the week and 14% over the month.

What’s Behind The Gold Rush: Gold prices have been soaring to record highs, driven by uncertain global economic conditions and geopolitical tensions. Traditionally considered a “safe haven,” gold tends to rise when interest rates fall, a scenario many investors anticipate later this year.

Despite these factors, the reasons behind the sudden surge in gold prices are still unclear. After trading within a stable range for months, gold started spiking in early March, rising by 14% since then.

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However, geopolitical tensions have persisted for years, and the timing of Federal Reserve rate cuts has become more uncertain recently as U.S. Federal Reserve Chair Jerome Powell has reiterated that the central bank was not rushing to adjust borrowing costs, despite concerns about inflation.

Experts offer varied explanations for gold’s unprecedented rise. Some attribute it to central banks concerned about the dollar’s role, while others point to funds anticipating a shift towards lower interest rates by the Federal Reserve.

Algorithmic traders may also be contributing to the rally, along with concerns about inflation and economic uncertainty. Additionally, factors like weakening currencies and upcoming elections add complexity to the situation.

Big Bets But Reasons Unknown: While central banks, institutions, and individual investors continue to be major buyers, the reasons behind their increased activity remain somewhat unclear.

Despite strong demand for gold, particularly from central banks, ETF outflows have been notable. Analysts suggest that long-term investors may be taking profits, but this hasn’t significantly impacted prices. Instead, these sales are absorbed by other investors, potentially including central banks.

Ultimately, the reasons behind the current gold rally remain somewhat elusive. While expectations of lower interest rates and concerns about economic uncertainty may be contributing factors, the precise drivers of this surge are still subject to debate.

Analysts have noted a growing momentum in futures trading, suggesting excessive optimism about gold’s outlook at current levels. However, demand for gold in India remained subdued due to soaring domestic prices, while premiums remained stable in China.

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