For the last few years, the shine of gold is continuously cumulative owing to increasing price of gold. This has national and international reasons. In India, women have been crazy about gold since ancient times. In that period, men as well as women used to wear gold jewellery. In Hinduism, there is also a tradition of offering gold to the gods and goddesses or making the gods wear gold crowns. Because of this, many tons of gold are deposited in the temples of India. The World Gold Council (WGC) released a report in the year 2020, according to which more than 4 thousand tons of gold is deposited in the temples of India.
Apart from this, whether there is a recession in India, or the economy is rosy, people invest in gold in both situations. Even during and after the Corona pandemic, the Indian economy is continuously improving, and it remains one of the fastest growing economies in the world. However, inflation is still a matter of concern in the case, due to which the Reserve Bank of India is keeping the policy rates stable in its monetary reviews. As a result, banks are also keeping the deposit rates stable. If inflation is low, the deposit rates of banks will be even lower, and people will invest in gold in the hope of higher returns.
If we talk about international reason, there is a possibility of the Federal Reserve Bank of USA will reduce the interest rate when inflation come down. Federal Reserve Bank’s chief Jerome Powell has recently said in a statement that inflation in USA can come down to 2 percent. Obviously, the Federal Reserve Bank can cut the interest rate if inflation softens. Therefore, based on the expectation of reduction in interest rates, there was a sharp rise in the price of gold in the international market and it reached the price of $ 5,000 per ounce on July 17, 2024.
Generally, the central banks of all the countries of the world follow the footsteps of the Federal Reserve Bank. Therefore, it is believed that when the Federal Bank cuts the interest rate, the central banks of other countries will also cut the interest rates, which will reduce the interest rates of deposits. When the interest rate on deposits decreases, people will be motivated to invest in gold for better returns.
Meanwhile, due to the slowdown in the global economy, the dollar has also weakened in the international market. it is still the strongest currency in the world. When the dollar weakens, people feel that they will get better returns by investing in gold and their investment will also be 100 percent safe. However, due to the rise in the price of gold in the global market, the price of gold in India also increased significantly. The price of 10 grams of gold in Indore has exceeded Rs.76,000, which is the highest level till date. Not only this, the price of gold increased by Rs.4,775 in the period from 1 to 17 July 2024. The price of gold on 1 July 2024 was Rs.71,275, which increased to Rs.76,050 on 17 July.
At present, investors are getting good returns in gold. Investors, who invested in gold in the year 2023 have got a return of 16.4 percent, which is much better than bank or other safe investment options. Gold has given a return of more than 100 percent on investing in gold for 10 years from 2014 to 2024, while the price of gold in the global market has increased by 65 to 75 percent.
In June 2008, the price of 10 grams of gold was Rs.11,901, while in June 2014, the price of 10 grams of gold was Rs.25,924, while in June 2017, the price of 10 grams of gold was Rs.29,499. In August 2020, there was an unprecedented increase in the price of gold and it reached the level of Rs.56,499 and in October 2023 its price became Rs.62,193, while on 29 December 2023, the price of gold was Rs.63,332 per 10 grams and on 17 July 2024, the price of gold increased to Rs.76,050 per 10 grams.
Due to too much rain, the price of vegetables and seasonal crops has increased, but inflation may soften after the rain ends, because according to Skymet, the monsoon may remain normal in 2024. In such a situation, the central bank may cut policy rates in the upcoming monetary reviews, which may reduce interest rates on deposits and when this happens, investors can start investing in gold to get better returns.
Looking at the 50-year history of gold price fluctuations, it is known that major fluctuations in gold prices continue for about 5 to 6 years. In such a situation, it is being speculated that the price of gold will remain at a high level for the next few years and looking at the current trend in the matter, it seems that by the end of this year, the price of gold per 10 grams may also cross Rs.80,000/- mark.
According to BOFA Global Research, central banks around the world have bought a lot of gold in 2022 and 2023. Further, in this connection, a survey conducted by Central Bank Gold Reserve from 19 February 2024 to 30 April 2024 and as per survey, central banks around the world want to increase gold reserves even more in the next 12 months. Obviously, this will increase the demand for gold and the increase in demand will naturally increase its price. Currently, gold has a 20 percent share in the reserves of all the central banks of the world.
In December 2023, the Reserve Bank of India had 803.6 tonnes of gold, which increased to 827.69 tonnes on 26 April. It is worth noting that India is unable to meet the domestic demand for gold on its own, therefore, it has to depend on other countries to meet the domestic requirement. Today, the US has the highest gold reserves in the world at 8133.47 tonnes, Germany is in second place with 3359.09 tonnes. The cost of imports and the tax levied on gold also cause a surge in the price of gold in India.
Due to high inflation, low interest rates on deposit in banking and other financial sectors, geopolitical crisis, slowdown in global economy, etc., people’s trust in other means of investment has decreased. People feel that by investing in gold, they can keep their money safe and get handsome returns.
Satish Singh, Ahmedabad based Senior Columnist. Views are Personal
