Is the yellow fellow trumping the green dream? Is gold getting an inadvertent leg up due to the greenback’s custodian’s misadventures in Greenland? And most importantly, is the gold rush slowing down, or will gold prices go up further. And what does it mean for investors and gold owners in India alike?
Gold price that were on the up and up over the past few weeks may have dipped from a peak of around 1.6 lakh rupees for 10 grams to a little over 1.55 lakh (prices vary from place to place), but the gold rush may just be taking a breather than a distinct pause, going by expert analysis.
Market whispers abound that it could well breach the Rs 2 lakh mark this year itself.
That would well be sooner rather than later if the global uncertainties persist. The very reason for the present gold spurt is being laid primarily on the ratcheting up of tensions between the United States and Europe over Greenland. The graph coincides directly in proportion to President Trump’s dialling up American claims over Greenland and a belligerent Europe going on the defensive, including countries like France and Germany even sending soldiers to guard the icy island in the cynosure of the storm.
The prospect of the world’s richest, most powerful country going head-to-head with its wealthiest and predominant trading bloc was enough for nations to get their guards up — and gold rates to shoot up. Don’t forget this strife came just days after the US swooped down on Venezuela’s oil reserves, making its President a prisoner in the bargain.
Gold’s safe harbour feature, where its value is not tied to any currency or nation, had suddenly made it attractive on two counts. One, of course, is the traditional is the safe asset feature of the shiny resource, something that had prompted its prices to zoom up ever since, first the Ukraine war, then the Israel-Palestine war and now, the Greenland standoff (Iran only gets an honorary mention since there has been no flare-up, yet).
While this has been so traditionally — gold prices always increase when there is uncertainty and turmoil since it is considered a safe asset, the second reason has been the more interesting — how nations of the world have been buying up more of it, directly contributing to its value going up due to demand. And if you thought Donald Trump had a hand in this too, you are not far from the truth. The US dollar has been the world’s primary trading currency and reserve for long, though ever since the west froze Russian assets and placed sanctions on Russia after its invasion of Ukraine, there has been a rethink.
While China has been pushing its currency, it is still to come on its own, with the Chinese regime still holding a tight control over its convertibility, thereby reducing its chances of becoming the alternative. In fact, all it took was one comment from the BRICS block of countries that they could look at alternatives to the dollar to make the US spew fire and venom on member states like Brazil and India.
The next best thing, of course, is to invest in a neutral uncertainty-proof asset like gold, which many nations’ central banks have been buying up in higher quantities than earlier in the recent past. It is no surprise that while the US dollar’s share in global reserves has dropped from 71 per cent at the start of this century to 58 per cent in 2024. Gold is now the second largest reserve asset in the world.
For India specifically, while the weakening of the rupee against the dollar, not to forget the trade uncertainties and the economy’s own K-shaped spiral has meant gold prices be on the up and up. With worries both global (US trade deal in a limbo) and local (issues with neighbours not limited to Pakistan and China), no one’s likely to be surprised if gold prices go up even further in the weeks and months to come. It is no surprise that Gold exchange-traded funds (ETFs) are having a record run in the Indian markets — reports say nearly Rs 12,000 crore worth of net flow happened just last month.
And while gold is glittering, can shiny silver be far behind? This week it had hit a peak of $100 an ounce, up from just $28 a year ago.
