Context:
Gold tops all other financial assets in 2024, rising 42 per cent at a dollar price, and over 13 per cent in rupees. Aggressive buying by central banks continues to add on for 2024, 1,045 tonnes into three years’ consecutive purchases of above 1,000 tonnes.
The Reasons for Gold Prices Going Up
Economic and Political Factors
- Inflation & Economic Incertitude
- Global economy goes down; supply chains disturbed (due to pandemic, due to war in Ukraine, Middle East turmoil).
- Effects of United States Policy
- Rumors concerning his administration imposing tariffs on gold increase demand.
- Central Bank Demand
- Governments, mainly with China’s and India’s help, increase their gold reserves as a safeguard against inflation.
Market Trends & Their Effects in Investment
- A Strong Dollar Against Gold Prices
- On theory, a strong dollar retards gold prices; at the same time, inflationary fears and central bank demands push up the gold price to record highs.
- Diminished Supply
- Mining and refining gold take years, so it might lead to the possible price spikes with the increased demand.
Gazing into Investment Opportunities & Risks
- Gold ETFs & stocks in mining companies
- Attracting powerful inflows from these channels thanks to the rising price of gold.
- Jewelry Sector
- Demand goes up when gold prices go high, but managing inventory costs of stock becomes an issue.
- Gold Backed Loans
- Risk calibration should be done by lenders, as high prices increase the collateral value, but there is also a risk in case of defaults.
Will Gold Continue Its Bull Run?
- Gold remains in demand while the global uncertain scenarios remain, whereas it can be expected to go through price swings if US revalues its gold reserves or imposes tariffs.
- Gold will maintain its role of safe haven asset in periods of economic turbulence.
