As the prices of gold and silver hit an all-time high a couple of days back, Indian women could flash a self-confident smirk on their faces for being long-standing votaries of investment in bullion. In spite of the advice of several investment gurus, Indian women continued their trust in gold, which has resulted in a moment of pleasant vindication.
On October 23, the yellow metal crossed the psychological level of Rs 80,000 per 10 g for the first time in history, while silver zoomed past Rs 1 lakh per kg. Gold has been on an upswing for the last two years as it jumped from nearly Rs 52,000 in 2022 to Rs 80,000 in 2024, showing a 53 per cent appreciation.
Though India is the second largest buyer of gold, its price is dependent on several global factors such as mining cost, dollar weakness, rupee weakness, global volatility and consumer demand. Unfortunately, for those who failed to realise gold’s importance in their investment portfolio, all the four influencing factors are on full steam.
Gold mining cost has increased by 17 per cent to around $1,350 an ounce (Rs 40,000 per 10 g) in 2024 from $1,150 an ounce (Rs 30,000 per 10 g) in 2022 as inflation weakened the dollar's purchasing power. Rupee depreciated by 13.5 per cent from 74 a dollar to 84 a dollar. Global volatility on a high boil after Russia invaded Ukraine in February 2022 and global uncertainty further compounded when the Palestinian terrorist organisation Hamas rained missiles on Israel in October 2023.
Last but not least, central banks have become one of the biggest buyers of gold because of widening divergence between the US-led West and other non-Western countries. Out of around 4,900 tonnes of gold purchased in the last four quarters globally, central banks bought over 1,000 tonnes, which is more than 20 per cent of the overall demand.
Similarly, individual and institutional investors purchased nearly 900 tonnes of gold, which is nearly 20 per cent of the overall demand.
The gold bought by people around the world for the purpose of jewellery is a little over 2,000 tonnes, which make up 40 per cent of the demand for the yellow metal. These statistics show that the gold price was on fire mainly because of speculative demand or hedging demand from those who are not end-users. If global uncertainty ends and if countries zero in on any paper currency to park their foreign reserves, the current unprecedented gold rally will come to a halt because the end-user’s jewellery demand is just 40 per cent of the total supply.
The trillion-dollar question, however, is whether the world will see such a happy-all scenario in the short-term. Most unlikely. The world is on the cusp of unprecedented changes in the global power matrix and no change happens without a tussle. But will the world never witness an all-good global scenario? Yes. Probably, at some point in time in future. Until then, let smart Indian women enjoy their moment of glory.
