Gold Hits Record ₹88,000, Silver Crosses ₹1 Lakh - 5 Key Factors Driving the Rally

Gold Surges to Record High of ₹88,000, Silver Crosses ₹1 Lakh Mark - 5 Key Factors Driving Precious Metals Rally

The precious metals market has witnessed an extraordinary rally with gold and silver prices soaring to unprecedented levels. On the domestic front, MCX gold has touched a new all-time high of ₹88,310 per 10 grams, while internationally, gold prices climbed to $3,004.90 per ounce. The white metal has not been left behind, with MCX silver crossing the psychological ₹1 lakh mark for the first time ever, reaching ₹1,01,999 per kg before settling at ₹1,00,761.

This remarkable bullish trend has resulted in gold prices rising approximately 14% year-to-date, driven by a combination of macroeconomic factors and geopolitical tensions. Market analysts believe this upward momentum could continue in the near term, though some profit-booking may occur at higher levels.

What's Fueling the Gold and Silver Rally?

Financial experts have identified five primary factors contributing to the current surge in precious metal prices:

1. Economic Uncertainty from US Tariff Policies

The ongoing uncertainty surrounding US trade policies and potential tariff changes has created significant anxiety in global markets. This instability has enhanced gold's traditional appeal as a safe-haven asset, with investors seeking protection from potential economic turbulence. The precious yellow metal typically performs well during periods of heightened uncertainty and volatility.

2. US Federal Reserve Rate Cut Expectations

Recent inflation data from the United States has reinforced expectations of potential interest rate cuts by the Federal Reserve as early as June 2025. Both Consumer Price Index (CPI) and Producer Price Index (PPI) readings came in lower than anticipated, with February Core CPI at 0.2%, below the market consensus of 0.3%. Similarly, the year-over-year CPI cooled to 2.8%, down from 3.0% a year ago.

Lower interest rates typically benefit non-yielding assets like gold, as they reduce the opportunity cost of holding such investments. This prospect has fueled investor interest in precious metals as a viable alternative to interest-bearing securities.

3. Weakness in the US Dollar

The US dollar index has experienced a significant decline, falling over 4% year-to-date. This weakness in the greenback has made gold more attractive to international investors, as the precious metal is priced in dollars. A weaker dollar makes gold less expensive for holders of other currencies, thereby increasing demand and driving prices higher.

4. Central Banks' Gold Buying Spree

Global central banks have been aggressively accumulating gold reserves, purchasing over 1,000 tonnes annually for the past three years. This persistent buying trend underscores gold's importance as a strategic reserve asset and has provided substantial support to prices.

The trend accelerated notably after Western nations imposed financial sanctions on Russia following its invasion of Ukraine in 2022, freezing its central bank reserves. This development prompted many countries to diversify their reserves away from traditional currencies and into gold as a hedge against geopolitical risks.

5. Investors' Shift from Equities to Gold

The prevailing uncertainty in global trade policies has increased risk aversion among investors, leading many to reallocate funds from equity markets to gold. The precious metal's historical performance during periods of economic turmoil makes it an attractive strategic asset for portfolio diversification.

This shift in investment preference has contributed significantly to the sustained demand for gold, pushing prices to record highs.

Gold Price Outlook: Key Levels to Watch

From a technical perspective, gold has already surpassed critical resistance levels of $2,930 per ounce internationally and ₹86,600 per 10 grams in the domestic market. Market experts project that gold could potentially reach $3,050 per ounce if prices manage to sustain above the $3,000 mark, and approximately ₹89,500 per 10 grams in the domestic market.

However, analysts caution that some profit-booking or market exhaustion is likely near these levels in the short term, which could trigger a temporary pullback before the next leg of the rally.

Factors to Monitor in the Coming Week

For the week ahead, market participants should closely monitor several key events that could influence gold and silver prices:

• Federal Reserve policy meeting and statements
• Bank of England and Bank of Japan policy decisions
• US retail sales data
• Movement in the US dollar index
• Developments in the ongoing tariff discussions
• Updates regarding the Russia-Ukraine ceasefire agreement

Any significant developments in these areas could potentially impact the precious metals market and determine the short-term direction of gold and silver prices.

For retail investors looking to add gold to their portfolios, the current market dynamics suggest continued strength in precious metals, although strategic entry points should be considered given the rapid price appreciation seen in recent weeks.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of

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IndusInd Bank Auditors Demand Forensic Audit of Derivatives Portfolio

IndusInd Bank Auditors Call for Forensic Investigation of Derivatives Portfolio

In a significant development that has sent ripples through India's banking sector, the joint auditors of IndusInd Bank have formally requested a forensic audit of the bank's derivatives portfolio. This comes after the discovery of serious discrepancies that could potentially impact the bank's net worth by 2.35% as of December 2024.

Auditors Push for Deeper Investigation

According to reliable sources within the bank, the joint auditors - MP Chitale & Co and MSKA & Associates - have written to the bank's board requesting a thorough forensic investigation of its derivatives operations. This development follows the bank's March 10 disclosure regarding certain irregularities in its derivatives portfolio.

In response to this request, the board has begun the process of selecting a top-tier firm to conduct the forensic audit. This comes at a critical time for the Hinduja Group-promoted private lender, which has already witnessed a staggering 50% market value erosion over the past six months.

Financial Impact and Market Response

The financial implications of these discrepancies are substantial. The bank has indicated that approximately ₹1,600 crore of the impact is likely to be reflected in its March quarter earnings. The market reaction was swift and severe, with the stock plummeting 27% on Tuesday following the disclosures - the largest single-day drop in the bank's history.

During an analyst call addressing these issues, IndusInd Bank's Managing Director and CEO Sumant Kathpalia confirmed that an external agency had been appointed to review the derivatives portfolio. The report from this review is expected by the end of the fourth quarter.

PwC's Ongoing Review

Sources indicate that PricewaterhouseCoopers (PwC) was appointed as the external agency to conduct an accounting review of the portfolio after the discovery of these issues. However, PwC's report has yet to be presented to the board.

According to management statements to investors, these discrepancies have persisted for the past five to seven years. "We began reviewing our internal trade book and noticed some discrepancies in our business, which were identified between September and October," Kathpalia explained to analysts following the disclosures to stock exchanges.

Leadership Changes Amid Crisis

In what appears to be related to these developments, the bank's Chief Financial Officer, Gobind Jain, resigned in January - just months after the discrepancies were first identified. While Jain cited plans to explore other opportunities, the timing has raised questions among market observers.

Following Jain's departure, Arun Khurana, the executive director in charge of global markets and transaction banking, was given additional responsibilities as CFO.

Audit History and Regulatory Oversight

Over recent years, multiple audit firms have reviewed IndusInd Bank's financial statements:

• Price Waterhouse (2015-16 to 2017-18)
• SR Batliboi & Co LLP (2018-19)
• Hari Bhakti & Co LLP (2019-20 to 2020-21)
• Hari Bhakti & MP Chitale (2021-22)
• MP Chitale and MSKA & Associates (2022-23 to present)

The Institute of Chartered Accountants of India (ICAI) is expected to review the bank's books after taking suo-motu cognizance of the accounting discrepancies. This adds another layer of scrutiny to the bank's financial practices.

Root Cause of Discrepancies

According to available information, the crisis stems from internal trades involving low-liquidity instruments, such as 3 to 6-year yen and 8 to 10-year dollar borrowings. Rather than directly hedging foreign currency borrowings and deposits with external counterparties, the bank utilized its internal desk for the hedging process.

While external trades were marked-to-market, the internal trades were valued using swap valuations. As a result, the two legs of the trade could fluctuate over the contract period but typically converge at maturity. This practice apparently prevented the bank from identifying the accounting errors for several years.

It was only after the Reserve Bank of India issued a new circular in September 2023 that the bank began a comprehensive review of its derivatives portfolio, which ultimately led to the identification of these discrepancies.

For retail investors holding IndusInd Bank shares, this development warrants close attention as the full financial impact and regulatory consequences continue to unfold.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

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