Will gold prices touch ₹90000 mark in 2025?
Introduction
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Gold prices have been on a steady rise for a couple of years. This is mainly due to the unpredictable global events like covid virus breakout, Russia-Ukraine conflict, Israel-Palestine conflict resulting in unstable economies around the world, essentially making gold the preferred investment for many hence, driving the prices upwards.
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Historical significance and price trends of gold : Historically, gold started as a medium of exchange, which to enhance convenience was later used as a base against which currencies were pegged. Additionally, in India the metal holds significant economical, as well as cultural significance. This means that apart from the investment reasons, there have been multiple reasons for the ever increasing demand for gold. This has resulted in a consistently rising gold prices over the past couple of decades.
- The speculative nature of gold price predictions and their relevance in 2025 : Gold prices are subjected to the demand in the market. This demand is driven by various factors such as seasonal cultural activities like religious and wedding events in the country, as well as gold being the perfect hedge against inflation and unstable equity markets.
Factors Affecting Gold Prices
- Global Economic Conditions
- Inflation rates have a major impact on gold prices. Inflation essentially means that the currency is losing its value. To preserve the purchasing power, and hedge the risk of falling currency value, the investors often prefer buying gold. This drives up the demand leading to an increase in prices.
- Interest rates and central bank policies (Fed, RBI, etc.) too impact the price of gold. Central bank policies and interest rates have an impact on how lucrative the returns could be on investments into fixed income securities, and overall market conditions. This could lead for a rise or fall in the demand for gold depending upon the central bank’s stance on policies. Which essentially will dictate the price of the metal.
- Geopolitical tensions have a major effect on safe-haven assets like gold. Due to such tensions, the equity markets and alternative investment markets often take a hit. Making it unviable for the investors to inject funds into such assets. This results in the investors preferring safer investment avenues which have a proven track record of low price volatility, and stable returns. Such as gold. Hence, there is a noticeable inverse correlation between gold price and equity markets performance during periods of turmoil.
- Domestic Economic Factors
- India’s economic growth and consumer demand for gold : There’s no denying that the average household income in India has been consistently rising over the past couple of years. This increase has resulted in a higher disposable income of the upper middle class of the country. This boost in disposable income means that the population is better equipped to spend on investments like gold, which has an impact on the demand of the metal in the market and subsequently a boost in the gold price.
- The influence of the Indian Rupee and currency fluctuations : Monetary position of a country is one of the most impactful factors influencing gold prices. Since, in the international markets, gold is priced in US dollars, currency fluctuation would have a direct impact on the gold prices in the country. Recent weakening of the Indian rupee is one of the reasons behind the surge in the gold prices in the country.
- Government policies and taxes affecting gold imports : Import of gold attracts certain taxes. A country’s policies around gold import and it’s tax implications can have a major impact on gold prices within the country. Depending upon the policies and tax treatment, this can make gold expensive or cheaper in the country. Hence, gold is cheaper to buy in the middle eastern countries where the taxes are lax compared to India.
- Market Sentiment and Investor Behavior
- Impact of market speculation, investment trends, and gold as a hedge against uncertainty : Like any financial instrument, market speculation and investment trends have a huge impact on metals too like fold prices , silver prices, etc. since speculation drives up or drives down the demand, the prices get affected too. Also, being a stable investment that gold is with less price volatility, low risk, and stable returns over a long timeframe, it is used as an investment to hedge risk and uncertainty of the overall investment portfolio.
Historical Trends and Predictions
- Analysis of historical gold price trends in India over the last decade
Over the last decade, gold prices have shot up considerably from approximately INR 26,000 to INR 86,000. This rise in the price can be attributed to various factors such as economic policies, central bank gold reserves, geopolitical events such as covid outbreak, Russia - Ukraine war, equity market uncertainties, among many others. Usually a high magnitude impact on the gold and silver prices is seen during peaks of uncertain situations where the investors flock from investing in risky assets like equity market instruments to safer assets like gold and other stable commodities.
- Review of previous price milestones and their causes (e.g., crossing ₹50,000, ₹60,000)
Shocking as it may seem, many major price milestones in gold price trends were reached only over the last 10 years. And major milestones like domestic gold price reaching INR 50,000 per 10 gram, and INR 60,000 as well as INR 70,000 only from 2022! That is astonishing returns when compared with previous price trends; the causes can be attributed to an increased instability in the equity markets, and looming threat of recession across almost all major economies. Will gold price increase further - Considering ever increasing chances of recession, the chances are high!
Influence of Global Events on Gold Prices
- The role of pandemics, wars, and natural disasters in driving gold prices is pretty substantial. The global pandemic that hit the world in 2019 resulted in major uncertainty, and negative sentiment amongst the investors. The Indian equity markets saw a major correction in 2020 which resulted in the investors going all in either in heavily discounted equity instruments and safer assets like gold, silver and other precious metals.
- Global supply chains and mining production impact the price of gold severely. An increased mining production or ample supply can subdue the demand effect and essentially bring the prices down, and vice versa.
- The significance of large-scale purchases by countries or financial institutions is extremely high. This leads to an increased demand in the global markets leading the institutional and retail investors to follow the suit and pump more money into gold assets. These large scale purchases to either increase gold reserves, or for other purposes leads to an exponential increase in the gold rate in the global market.
Possible Scenarios for Gold Prices in 2025
- Bullish Scenario: Price Surge to ₹90,000
- When the bull trend, gold is able to go up to ₹90,000 owing to a plethora of factors. Inflation is one such prime factor. Under periods of inflation, investors gravitate towards gold as a form of preservation of value, and that further generates demand and consequently price. Market volatility is another significant factor; times of political or financial turmoil, such as wars or financial crises, are times when investors shift their assets to gold, which is a safe-haven asset. Geopolitical tensions that have led to the Russia-Ukraine war, for example, have increased demand for gold. In addition, increasing demand from big markets such as India where gold is an investment and cultural symbol can also increase prices. As the disposable incomes of the people rise in such areas, more individuals can invest in gold, thus driving its price higher.
- Bearish Scenario: Price Stagnation or Decline
- Conversely, during bearish situations, gold prices are stale or falling. Robust economic growth within the major economies would guarantee that investors prefer to invest in riskier substitutes such as stocks, thereby repressing demand for gold. Stable interest rates will also repress gold demand. When interest rates increase, fixed income or bond investing would be more favorable compared to holding non-yielding gold so that demand for gold continues to be subdued. Further, when there is reduced global geopolitical tensions and market stability, flight to safe-haven investments such as gold will be limited, therefore causing prices to fall.
- Conservative Forecast: Gradual Increase
- Conservative estimate puts in place a long-term appreciation of gold prices slowly. In due course, circumstances like moderate inflation, consistent growth of the economy, and long-standing geopolitical tensions might drive the price to ₹90,000 but not right now. Moderate, long-run appreciation would thus be fueled by ongoing demand rather than speculative highs in the near term. While therefore gold can never hit ₹90,000 overnight, a gradual, credible appreciation is therefore in the pipeline.
Impact on Indian Investors
- How the rise in gold prices could affect Indian consumers and investors
Gold prices have accelerated drastically since the last couple of years. This to some extent has slowed down the demand for the metal among the retail investors and households as the general consensus feels that the price may come down. However, if the price trend continues, it may result in lower amounts of gold purchase among the middle class population apart from the seasonal surge during festival and wedding seasons. It is recommended that the investor who wishes to build a long term portfolio with investments diversified into gold, can make regular purchases in modern gold assets like digital gold offered by indiaGold, as it will help the investor to average out the buying price in case the price cools down in the future, and if not, the investors would be able to capture the current prices.
- The potential for increased investment in gold-backed products (e.g., gold loans, ETFs)
Increased gold prices may positively impact other industries with offerings related to gold like gold loan, and the ETF industry. This surge in price will also present new opportunities for the participants to make returns by investing in gold ETFs and also to the borrowers who can use their existing gold to borrow funds; as the increased intrinsic value will help borrow more money from the lenders. Lenders such as Indiagold offer a high loan to value (LTV) ratio which will most definitely benefit the borrowers to get higher value for their gold.
Conclusion
In general, prices of gold in 2025 will be determined by a set of interconnected variables. The general world economic uncertainty, including inflation, geopolitical tension, and volatile interest rates, would initiate the call for gold as a hedge product, which will drive metal prices up. The last gold price rise trend following the last experiences such as the pandemic and the wars indicates we can expect to see a rally to ₹90,000 on 10 grams. But no guarantee, for the economic pick-up, level interest rates, and muted demand can also check price appreciation too.
Domestic gold performance trends like the increase in discretionary expenditure in India and rupee decline also contribute towards pushing prices. Finally, when the price of gold reaches ₹90,000, the amount and when that happens remains unknown. Indian consumers and investors need to remain alert to these trends both domestically and internationally so as to make the correct investment decisions.
