Recently, there has been a rapid surge in gold prices, reaching record highs. This has captured the attention of various investors who are contemplating whether they should invest their money in gold.
Let’s delve deeper and understand why gold prices are rising and whether it is the right investment for you.
What’s Happening?
According to Reuters, the Indian gold market is currently in an unusual situation. On one hand, gold futures prices are soaring, while on the other hand, the demand for gold in the country is declining. Recently, gold futures reached record highs, crossing Rs. 69,487 per 10 grams. It is noteworthy that gold prices have increased by nearly 10% so far this year.
However, despite such high prices, figures indicate a decrease in gold imports in India. According to government sources, gold imports in March dropped by over 90%, the lowest since the COVID-19 pandemic. It is believed that high gold prices are reducing its demand.
Why Are Gold Prices Rising?
Several factors contribute to the increase in gold prices, including:
Expectations of lower interest rates: The U.S. Federal Reserve signalling interest rate cuts are an indication. This makes investment in gold attractive. According to the CME Group’s FedWatch Tool, traders are currently expecting a 69% probability of a rate cut by the Fed in June, while this probability was 64% before Friday’s data.
Geopolitical tensions: Geopolitical tensions in regions like the Middle East and Ukraine are prompting investors to seek safe investments. Gold is traditionally considered a safe investment, so investors are attracted to it.
Strong demand from China: Continuous buying of gold by banks and common people in China is also driving the price up. China is one of the world’s largest economies, and an increase in demand from there is a positive sign for gold.
Historical Gold Performance
You can imagine that in 1964, the price of 10 grams of 24-carat gold was approximately Rs. 64, and as of March 2, 2024, the price of 10 grams of 24-carat gold was approximately Rs. 68,500. This represents a return of over 100,000% from 1964 to 2024.
The data indicates the value of 24-carat gold per 10 grams, from 1964 to 2024, in Indian Rupees.
What Does it Mean for Investors?
While gold prices are steadily rising, if strong figures come from the U.S. economy in the coming days, gold prices could see a decline. Therefore, investors should remain cautious and decide on gold investment while keeping an eye on market trends.
Before deciding to invest in gold, you should consider your investment goals and risk tolerance. Gold may be suitable for long-term investors looking to diversify their portfolios. However, it may not be suitable for short-term investors.
What’s Next?
According to the Economic Times, analysts believe that after a nearly 10% surge in the past five weeks, some profit-taking could be seen. However, the trend is still positive as the basic position of gold has become positive. Therefore, gold prices could see a surge from Rs. 70,550 to Rs. 72,000 per 10 grams in the near future. One reason for this is that many central banks are buying gold to protect against rising inflation.
Additionally, jewellers in Mumbai are expecting a surge in gold sales during auspicious occasions like Akshaya Tritiya at the beginning of the upcoming month. In such a scenario, increasing demand could also support gold prices.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
*Disclaimer: Teji Mandi Disclaimer
