Gold Price Up 50% In 2 Years: Why Is Precious Metal Going Through The Roof?

New Delhi: In January 2022, the price of 24 Carat gold was around Rs 50,000 per 10 grams.

Now, one has to shell out Rs 75,000-plus to buy 10 grams of gold.

That’s a staggering 50 per cent rise in a little over two years.

In the first quarter of 2024 (January-March), gold price has risen 13 per cent.

The yellow metal has clearly emerged as one of the best-performing asset classes.

Gold has always had an enduring attraction and been of great value. But what’s the reason of its red-hot streak in recent times?

Interestingly, a recent Goldman Sachs report stated that the surge is driven not only by traditional factors, but highlighted a shift in dynamics of the gold market.

The report pointed out new incremental factors, especially surge in accumulation by Central banks in emerging markets and a significant increase in retail buying in Asian markets. The huge Indian market obviously played a key role.

The recent upward movement of gold price cannot be explained by factors it traditionally correlates with such as Federal Reserve rates, growth expectations and currency strength.

Hence, despite expectations of fewer Federal Reserve rate cuts, strong growth trends and recor–breaking equity markets, gold has grown by 17 per cent in the last two months.

Extraneous factors have also propelled demand for gold to new heights.

Russia-Ukraine war, escalating tension in the Middle East have triggered fears of geopolitical instability, pushing investors to seek refuge in the ‘safe’ option of gold.

Also, leading economies have been hit by persistent inflation, which has eroded purchasing power of paper currency and driven investors towards gold as a reliable store of value.

In India, more and more people from the middle class and upper middle class are using spare resources to buy gold or even gold bonds.

Gone are the days when the Indian middle class would only think of purchasing gold for their children’s marriage. Now, they plan well in advance not only for their children, but also as a means for their future.

The Goldman Sachs report underscores the expectation for continued bullish momentum in gold price.

That is good news for people wishing to plan for future. But higher price does pose challenges for those elderly parents who had been waiting for gold price to come down.