Gold price near Rs 74,000: When will it reach Rs 2 lakh – 6 years, 9 years or 18 years? When it comes to return, tripling of the value of an asset is a significant milestone and when it comes to gold the trend in the time taken to its tripling has been quite erratic from 6 years to 18 years. With current price of 10 gram gold 999 has reached near Rs 74000, so most investors are curious when will it reach near Rs 2 lakh. Here is what the experts predict
Gold is one of the most dearly held household assets for people in India. It is a time-tested asset that has delivered very attractive returns when compared with other asset classes.According to the India Bullion and Jewellers Association (IBJA), the price of 10 gram 999 gold is set to touch Rs 74,000 as it reached to Rs 73477 on 18 April 2024. It took more than 9 years for gold to nearly triple and reach this level; the price was Rs 24,740 in 2015. Prior to this, the price had tripled in more than 9 years, from Rs 8,250 in 2006. Before this, it took almost 19 years for the gold price to triple from Rs 2,570 per 10 g in 1987. Before this cycle, the tripling time was nearly 8 years and 6 years.
A tripling from the current level will take gold beyond the Rs 2 lakh per 10 gram level. But the crucial question that every investor wants to know is how long will it take this time for the price to triple. Read on to know what experts are saying about the future returns on gold and the timing to reach the Rs 2 lakh level.
Time taken for gold prices to nearly triple
Date
Gold 999; Price/10 g
Approx time to grow
19-Apr-24
73596
8 years 9 months
24-Jul-15
24740
9 year 5 months
3-Mar-06
8250
18 years 11 months
31-Mar-87
2570*
8 years
31-Mar-79
791.22#
6 years
31-Mar-73
278.5**
Source: IBJA for gold prices since 2001, *As per Income Tax Act,1961, #RBI - average price for the FY,** Abaya Gold Buyers - average price for the FY
What experts say about duration for gold to reach Rs 2 lakh level
Gold prices are known to rise more when there is a major conflict in any corner of the world or when there is some uncertainty. So the prices will be influenced by how the ongoing issues pan out . "Historical data shows that major global changes, such as geopolitical tensions and economic crises, can significantly influence gold prices, leading to rapid increases within relatively short periods. The recent past of 5 years has shown rupee weakness as well as geopolitical issues and pandemic and war. All these together have given gold a spurt from Rs 40,000 to Rs 7,00,000+ — a gain of 75% in a matter of 3.3 years. In 2014, gold price was Rs 28,000 and in 2018 it was Rs 31,250, which is only 12% in a matter of 5 years," says Jateen Trivedi, VP Research Analyst at LKP Securities.
Gold prices had tripled in a period of around 9 years and the chances of this happening again cannot be ruled out. “Given recent trends, it's likely that gold prices could reach the Rs 2 lakh mark within the next 7-12 years,” says Trivedi.
Some experts are more optimistic about gold prices tripling and crossing Rs 2 lakh. “The geopolitical tension is likely to escalate between Iran and Israel after Ramzan and the China-Taiwan tension may also bring uncertainty. These two factors, apart from heavy paper trading of gold in SGE and Comex, are causes of concern due to which we are already seeing ATH (all time high) gold prices. In my opinion, gold prices can triple in the next 6 years itself due to these uncertainties, which will lead to dedollarisation,” says Surendra Mehta, National Secretary, India Bullion and Jewellers Association.
However, there is an instance of the tripling period extending to almost 19 years. This exception reminds us that any period cannot be taken for granted."Like any other asset, gold is subject to bull and bear markets, leading to variable annual returns. However, as long as there is no better alternative, gold will continue to be in great demand from consumers and investors alike, hopefully rising to meet their return expectations," says Vikram Dhawan, Fund Manager and Head - Commodities, Nippon India Mutual Fund.
How much role is inflation likely to play in gold price movement?
Gold is known to be one of the best hedge against inflation. “Gold price is directly correlated to inflation. Inflation has been high across geographies and will take time to cool off. As long as inflation remains high, gold prices will continue to get support and see an upward trend in the future,” says Harsh Gahlaut, Co-founder and CEO, FinEdge.
The direction of inflation will also determine how soon gold prices rise. "Inflation and gold prices often have a complex relationship. Gold is often seen as a hedge against inflation because its value tends to hold relatively steady or even increase during times of inflation," says Hareesh V, Head of Commodities, Geojit Financial Services.
Beyond inflation, other factors also influence gold prices. “When inflation rates rise, the purchasing power of fiat currencies decreases, leading investors to turn to gold as a store of value, thus driving up its price. This relationship is complex and not always direct, as other economic factors can also impact gold prices during periods of high inflation,” says Dhawan.
Will the shift from jewellery to bullion impact prices?
Supply of gold has been stable and any spike in demand has the potential to push the prices up over a shorter period of time. "The total supply of gold is limited, which is the one reason the 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 rest of the demand is usually met by recycling scrap gold," says Hareesh.
Rising demand from central banks is likely to continue and may push the prices up. “There has been large-scale buying from some large central banks as they are considerably increasing their gold holdings — like Russia, China, India, etc. Since the supply of gold is limited, this increase in sovereign treasury holdings will continue to put pressure on supply and will support gold prices. We do not see the supply-side pressure easing in the near future as the risk of geopolitical conflicts does not seem to be easing,” says Gahlaut.
Jewellery, which was traditionally one of the prominent demand puller, may no longer continue to do so in future. However, demand for bullion is expected to grow. “I can see that in a country like India, gold is converting its orbit from consumption item to investment item at a much faster pace. So, sale of jewellery will keep dropping with improved sale of bullion due to financialisation of gold,” says Mehta.
Other major factors that may impact the timing of tripling of gold price
A changing global order may leave a long-term impact on gold price movement. “A decline in the credit rating of the US, whether actual or perceived, may propel gold into a multi-decade bull run. Re-globalisation leading to competitive currency devaluations, along with trade disputes, is conducive for gold prices. On the positive side, bigger and wealthier emerging economies that have a cultural affinity towards gold, like India, may lead to a material increase in gold consumption, underpinning the prices,” says Dhawan.
Gold prices will rise further if the current continue to boil or see an escalation. “Any escalation of regional or global conflicts, outright wars breaking out, and dollar domination coming under pressure as a global currency can lead to a spike in gold prices. While returns from gold are not linear, gold will continue to play an important role as a risk reduction tool and as a hedge against inflation,” says Gahlaut.
One factor that could potentially reduce the gold supply significantly is ESG rules. “The strict adoption of environmental, social & governance (ESG) rules worldwide is a threat to gold production. This is because gold mines are among the most expensive and most toxic places,” says Dhawan.
What should investors do
Should you link your investment to how fast gold prices will triple? "In conclusion, the trajectory of gold prices will be shaped by a combination of economic indicators, geopolitical events, and market sentiment. While predicting exact price movements is challenging, the fundamental role of gold as a safe-haven asset suggests continued potential for growth in the future," says Trivedi.
Gold is likely to be a good asset class to diversify your investment exposure. "Diversifying investments and considering different assets, including gold, can help mitigate risks associated with inflation. During deflationary phases, gold tends to perform well compared to most asset classes,” says Dhawan.
Should you bet your gold investment only on its tripling potential? "While it is impossible to predict how long gold will take to triple from the current level, it is important to note that as an asset class, gold plays a critical role as a hedge against inflation, volatility, geopolitical and currency risks and, therefore, will remain an important part of asset allocation in a person’s portfolio," says Gahlaut.
Any time is a good time to invest in gold when you are diversifying your investment. However, while the price rise continues, there will also be opportunities to buy gold at dips. “Higher prices may eventually lead to reactions from the supply side. However, as gold is under-owned and global gold ETF holdings are at a five-year low, pullbacks may bring in dip buying from investors. Moreover, central banks continue to be net buyers,” says Dhawan.
This story originally appeared on: India Times - Author:Faqs of Insurances
