Gold prices are on fire as a potpourri of economic and political factors have turned the yellow metal into the most favoured asset class.

Investment guru Mark Mobius has forecast the price of the yellow metal to shoot up further, with central banks opting for an accommodative policy.

“Gold’s long-term prospect is up, up and up, and the reason why I say that is money supply is up, up and up. I think you have to be buying at any level, frankly,” Mobius told a TV channel.

His comments came on a day prices have hit a record high of Rs 38,770 per 10 gram in the national capital on buying from jewellers.

A number of factors have caused the prices to hit a sweet spot. The global economic slowdown, with fears the US economy is moving towards a recession, has turned gold into a safe haven. The trade wars and the geo-political tensions are also pushing up prices.

Add to that is the easy monetary policy adopted by central banks. An inverse relationship with money supply means higher prices as liquidity rises. Besides, falling stock prices have made gold more lucrative among investors.

India, which is one of the largest consumers of gold globally, imports much of the metal.

A couple of local factors have added a greater impetus to the price. The rupee has depreciated against the dollar, while finance minister Nirmala Sitharaman has raised the import duty by 2.5 percentage points in her maiden budget to 12.5 per cent.

With fundamentals supporting the metal, experts said gold is set to test even higher levels. “It could hit Rs 39,000-40,000 levels (per 10 gram) by Diwali,” Anuj Gupta (DVP – Commodities & Currencies Research) at Angel Broking told The Telegraph.

Shaankar Sen, MD, Senco Gold and Diamonds, said: “In the past few months we have seen a substantial jump in the gold prices and we expect the trend to continue. Global geopolitical situation coupled with central banks buying gold is driving this increase in prices. There is increasing trend of speculation on gold. Volatility in currency is also affecting prices.”

He said prices were likely to reach Rs 43000-45000 during the festive season, which will impact the demand for jewellery. “People who don’t have higher budgets could be affected.”

Hareesh V, head commodity research at Geojit Financial Services, said gold had the potential of hitting Rs 41,800 per ten gram by the end of this calendar year. He said he expected some correction on the Modi government announcing some stimulus to push up growth, though prices are unlikely to go below Rs 31,000 per 10 gram, which was seen in the April-June period. The markets are awaiting key events, which include the minutes of the US Federal Reserve’s July meeting and the Jackson Hole meeting of the central bankers.

Naveen Mathur, director-commodities and currencies at Anand Rathi Shares and Stock Brokers, struck a cautious note. He said though the sentiment remained bullish, prices may consolidate at the current levels and investors should not jump into buying the metal .

“The trend may remain positive, but that does not mean that prices will touch record highs. Investors should wait for some correction and then take a position. Yes, gold should be a part of an investors portfolio when other asset classes are not doing good, but one should not be euphoric now,” he said.