Earlier Gold prices tripled between 2006-2015 when in this 9 year period, the prices jumped from Rs 8,250 in 2006 to 24,740 in 2015. Before this, it took almost 19 years for the gold price to triple from Rs 2,570 in 1987 to 8,250 in 2006.
If we assume that the gold triples every 9 years, then gold prices per 10 gm are expected to touch 2 lakh level by 2033!
But would it really happen? What factors contribute to the gold prices? Lets see
One, Gold is assumed as a safe investment and therefore 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 such as geopolitical tensions and economic crises. In such scenarios, gold prices jump significantly even in short term.
In the last few years world has seen many tensions such as Russia-Ukraine war, Israel-Palestine conflict, India-China tensions, USA-China tensions, and the recent tensions between Iran-Israel, China-Taiwan and others.
And these tensions/conflicts are not going to end in the near future. So people would be more inclined to safeguard their money by investing in gold and It would definitely lead to further increase in the gold prices. And perhaps, tripling of gold prices this time would take less time than 9 years.
Second. Gold is known to be one of the best hedge/security against inflation. Whenever inflation increases, people tend to invest in gold to protect their investments. Since inflation is worrying almost all the countries of the world, gold prices are definitely going to be high.
Third, prices depend upon the mismatch of demand and supply. High demand and low supply leads to increase in the prices.
The supply of gold comes from two main sources — mining and recycling. The amount of new gold mined each year is relatively stable. And the recycling of gold as a concept is not favoured among the people. So overall the supply of gold is set to be much less than the demand leading to increase in the prices
Fourth, central banks across the world including RBI in India are increasing their holdings of the gold. They require gold as a backup, either to print new currency or to make investments. Again, since the supply of gold is limited, this will continue to put pressure on gold prices.
Fifth factor is increasing demand of Jewellery. The new class of youth population want their weddings to be grand and their incomes as well as purchasing powers have increased. Hence demand for gold is to be higher in the coming days and years.
Sixth, environmental concerns would further reduce the gold supply significantly due to 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.
So there are solid reasons to believe that gold would actually behave like diamond in the coming years, so stay invested in gold. Stock markets are also on a bull run. So, balance investments carefully.
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