Gold prices have almost tripled in the last 9 years, rising from Rs 24,740 in 2015. This follows the same pattern seen over the last 9-year period, when the price tripled from Rs 8,250 in 2006. Going forward, it became about 19. Naveen Kumar’s ET report said gold prices had tripled from Rs 2,570 per 10 gram in 1987, which was preceded by a tripling cycle of about 8 years and 6 years.
If the price continues to increase three times from the current level, gold can cross the figure of Rs 2 lakh per 10 grams. However, investors are keen to know how long it will take for the price to reach this milestone. What experts have to say on future returns and timeline for gold to reach Rs 2 lakh level:
Gold Prices Outlook:
Gold prices are sensitive to global events such as geopolitical tensions and economic crises, which can move rapidly in a relatively short period of time. Over the last 5 years, factors like rupee weakness, geopolitical issues, pandemics and wars have contributed to a 75% rise in gold prices, from Rs 40,000 to over Rs 7,00,000 in just 3.3 years . In contrast, from 2014 to 2018, gold prices rose only 12%, from Rs 28,000 to Rs 31,250.
Read this also Important update for NPS subscribers: New charges and safeguards announced by PFRDA
Jatin Trivedi, VP Research Analyst at LKP Securities, says, “Historical data shows that major global changes, such as geopolitical tensions and economic crises, can significantly impact gold prices, leading to higher prices in a relatively short period of time.” The recent past 5 years of rupee weakness along with geopolitical issues and the pandemic and war have seen gold surge from Rs 40,000 to over Rs 7,00,00 in 2014. “The price has gained 75% from Rs 28,000 in 2018 to Rs 31,250 in 2018, which is only 12% in 5 years.”
Trivedi also suggests that looking at recent trends, gold prices could potentially reach Rs 2 lakh within the next 7-12 years.
Some experts like Surendra Mehta, national secretary of India Bullion and Jewelers Association, are even more optimistic about gold prices tripling and crossing Rs 2 lakh. Mehta believes that rising geopolitical tensions between Iran and Israel after Ramadan, as well as China-Taiwan tensions, could bring uncertainty and lead to de-dollarization. He estimates that these factors, along with heavy paper trading of gold in the SGE and COMEX, could triple gold prices within the next 6 years.
However, it is important to note that the triple period of gold prices can vary significantly. Vikram Dhawan, fund manager and head-commodities, Nippon India Mutual Fund, points out that there is one such example where the three-fold period has extended to about 19 years. Dhawan reminds us that gold, like any other asset, is subject to bull and bear markets, leading to variable annual returns.
He says, “Like any other asset, gold is also subject to bull and bear markets, leading to variable annual returns. However, until there is a better alternative, gold will remain in high demand among consumers and investors. The demand will continue, hopefully growing to meet expectations of their return.”
Read this also New Mutual Fund KYC Rules: Is your KYC valid, verified, registered or on hold? trace
Gold is widely considered one of the most effective hedges against inflation. According to Harsh Gahlot, Co-Founder and CEO, FinEdge, “Gold price has a direct correlation with inflation. Inflation is high across all geographies and will take time to cool down. As long as inflation remains high, gold prices will remain supported. And see an upward trend in the future.”
The trajectory of inflation will also play a key role in determining the pace of rise in gold prices. Harish V, head of commodities at Geojit Financial Services, explains, “Inflation and gold prices often have a complex relationship. Gold is often seen as a hedge against inflation because its value remains relatively stable during inflation or It also increases.”
Apart from inflation, many other factors also contribute to fluctuations in gold prices. Dhawan elaborated, “When inflation rates rise, the purchasing power of fiat currencies decreases, causing investors to turn to gold as a store of value, causing its price to rise. This relationship is complex. and is not always direct, as other economic factors can also affect gold prices during periods of high inflation.”
The availability of gold remains constant, and any sudden increase in demand is likely to push prices higher in the short term. “The total supply of gold is limited, which is one reason why this metal is considered a valuable asset. The supply of gold comes from two main sources – mining and recycling. The amount of new gold mined each year is relatively stable “The demand is generally met by recycling scrap gold,” says Harish.
Increasing demand from central banks is expected to continue and may contribute to higher prices. “There has been massive buying from some of the big central banks as they have been significantly increasing their gold holdings – such as Russia, China, India, etc. Since the supply of gold is limited, this increase in sovereign treasury holdings The pressure will remain on supply and gold prices will be supported, we do not see the supply-side pressure reducing in the near future as the risk of geopolitical conflicts does not appear to be reducing,” says Gehlot.
Read this also Using a credit card? From over-usage to over-limit charges – top questions answered based on RBI’s new FAQs
Although jewelery has traditionally been an important driver of demand, it may not play the same role in the future. However, the demand for bullion is expected to increase. Mehta says, “I can see that in a country like India, gold is shifting from a consumption commodity to an investment commodity at a very fast pace. Hence, the decline in jewelery sales along with the improvement in bullion sales due to financialization of gold. “Will continue.” ,
The changing dynamics of the global scenario may have a lasting impact on gold price movements. Dhawan suggests, “A downgrade in America’s credit ratings, whether real or perceived, could fuel a multi-decade bull run in gold. Re-globalization coupled with trade disputes and competitive currency devaluations could lead to gold prices. Is favorable.” On the positive side, large and wealthy emerging economies like India, which have a cultural affinity for gold, could materially increase gold consumption, leading to higher prices.”
If current conditions persist or intensify, gold prices are expected to rise even higher. Gehlot says, “Any increase in regional or global conflicts, outright war and pressure on the dollar’s dominance as a global currency can lead to an increase in gold prices. “While returns are not linear, gold will continue to play a role.” “An important role as a risk reduction tool and hedge against inflation.”
The implementation of ESG regulations could potentially lead to a significant reduction in the supply of gold. Dhawan explains, “Strict adoption of environmental, social and governance (ESG) regulations around the world is a threat to gold production. This is because gold mines are among the most expensive and most toxic places to mine.”
Gold Prices: What Should Investors Do?
When considering linking your investment strategy to a rapid tripling of gold prices, it is essential to approach the decision carefully. “In conclusion, the trajectory of gold prices will be shaped by a combination of economic indicators, geopolitical events, and market sentiment. Although predicting exact price movements is challenging, gold’s fundamental role as a safe-haven asset is critical for growth. Suggests continued potential in the future,” says Trivedi.
Including gold in your investment portfolio for diversification purposes can be a wise choice. “Diversifying investments and considering different assets including gold can help reduce the risks associated with inflation. During deflationary phases, gold performs well compared to most asset classes,” says Dhawan.
Read this also Mutual Fund KYC Issues: What problems are MF investors facing with the new rules and how can they check their KYC status
However, it is important that you do not base your entire gold investment strategy solely on the expectation of its potential to triple. “While it is impossible to predict how long it will take for gold to triple from current levels, it is important to note that as an asset class, gold serves as a hedge against inflation, volatility, geopolitical and currency risks. Asset allocation plays an important role in investment and hence, says Gehlot, “asset allocation will remain a significant part of an individual’s portfolio.”
Investing in gold can be beneficial any time you are aiming to diversify your investment portfolio. Nevertheless, as the price of gold continues to rise, there may be opportunities to buy gold during market downturns. “Higher prices may eventually lead to a reaction from the supply side. However, as gold ownership remains low and global gold ETF holdings are at a five-year low, buying from investors may reduce. Furthermore, Central banks will also remain net buyers,” says Dhawan.
