📈 Gold Prices Hit Record High; Local Markets Under Pressure

Global gold prices surged to an all-time high of US$ 4,904.66/ounce on January 22, driven by escalating geopolitical tensions, a weakening US dollar, and expectations of US Federal Reserve interest rate cuts. • Global Outlook & Targets Goldman Sachs has revised its 2026 price target upward to US$ 5,400/ounce (from US$ 4,900), citing aggressive central bank accumulation—averaging 60 tonnes per month—and rising demand for gold ETFs from private investors. • Domestic Price Impact The global rally has caused a sharp spike in Sri Lankan markets (provisional data): 24-Carat Gold: Priced at approx. Rs. 419,100 per pawn (8g). 22-Carat Gold: Reached approx. Rs. 384,200 per pawn (8g). Silver: Also gained 3.5% globally, reaching US$ 96.45, mirroring the trend in precious metals. • Economic Implications Gems, Diamonds & Jewellery: The sector—traditionally a key foreign exchange earner (approx. US$ 282 Mn in 2024)—faces severe domestic demand contraction (over 50%) due to record-high prices and the 18% VAT impact. Financial Services: Rising collateral values are boosting the pawning and gold-backed lending volumes across banks and NBFIs. Reserves: Sri Lanka's gold reserves stood at US$ 86.15 Mn as of December 2025; the current rally provides a significant valuation lift to these national assets. • Market Drivers The "safe-haven" rush is intensified by central banks diversifying away from the US dollar, which fell 0.3% on the Bloomberg Dollar Spot Index.