Gold has been on quite a ride lately, jumping from Rs 25,000 to Rs 84,300 in just over a decade.
Gold hit the Rs 25,000 mark for the first time in August 2011, and the Rs 50,000 mark for ten grams of gold was surpassed in July 2020.
It took 108 months for the gold to move from 25,000 to 50,000, but it only took 48 months to reach the 75,000 milestone from 50,000 levels. In September 2024, the price of gold hit Rs 75,000. The 24 carat gold rate today in India is Rs 8,430 for 1 gram.
The next big milestone for gold is the Rs 1,00,000 level. The question is whether gold will reach the Rs 1 lakh mark in 2025.
If gold is to reach Rs 1 lakh, it must rise by only 13.5% from its current level. Possible? Let’s see.
The world is changing fast, particularly since Trump took office again in January. Trump’s tariff-related policies are generally predicted to be inflationary. Add to this the current global uncertainties, and it would suggest that the gold price rally is unlikely to end anytime soon.
We spoke to Colin Shah MD, Kama jewelry, to get a perspective. Colin says “Trump’s tariff threats have fueled economic uncertainty, boosting gold’s safe-haven appeal and driving prices upward. With geopolitical tensions, potential US tariffs, and economic slowdown concerns, gold is poised to scale new highs in 2025 as investors seek safe-haven assets.”
However, there are contrasting views as well. Dr. Renisha Chainani, Head–Research, Augmont says, “Most of the uncertainty related to tariffs is discounted in the prices, and it seems unlikely that this milestone would be achieved this year.
“If there is some new fundamental trigger like geopolitical tensions, Tariff war, world war, change in import duty, etc, this year, which is uncertain, then gold is expected to touch 1 lakh milestone,” adds Dr. Chainani.
Gold in USD
Gold in US Dollars is also reaching a milestone mark of $3,000. Currently, one ounce of gold trades around $2,858. That’s about $1,027 per 10 grams.
At INR-USD rate of Rs 87 to a dollar, it is nearly Rs 89,400, close to the cost of gold today in India.
Will gold in USD touch the $3000 mark?
“In a market anything is possible, outlandish though it may seem,” says Jamal Mecklai, CEO, Mecklai Financial. “As it approaches the huge number of USD 3,000 an ounce, the market appears to be getting nervous – which is not to say it will turn; it should, in my view, but if another bolus of geopolitical uncertainty were to hit and it did cross USD 3,000, it could shoot higher still,” adds Mecklai.
Gold and the US Fed
Apart from Trump’s tariffs impacting sentiments in gold, the role of the US Fed attains importance. After cutting rates by 100bps i.e. 1%, the US Fed has kept rates unchanged and is in no hurry to bring rates lower. If inflation shows an uptick, the Fed could even hike rates.
A higher rate scenario is bullish for the dollar, and when the dollar index strengthens, the gold price falls. Trump’s tariffs will result in the dollar strengthening, which also adds up to gold prices falling. This is because money moves into high-yielding assets, and so when the dollar becomes strong, the gold price fall.
“A US Fed rate cut could drive gold prices higher, while Trump’s economic policies may strengthen the dollar, making gold cheaper. The balance between these factors will shape the market,” says Shah.
For gold to move higher from here, the US Fed has to resort to rate cuts. “Gold prices in 2025 will be heavily influenced by U.S. Federal Reserve rate decisions and the strength of the U.S. dollar. If the Fed cuts interest rates, bond yields may decline, making gold more attractive as a safe-haven asset,” informs Dr. Chainani.
But, inflation is not looking to tumble down anytime soon in the US, and also after Trump’s tariff policies, the strengthening of the dollar is likely to put pressure on the price of gold.
“One more point to note is that the cost of extracting gold is around $1,300 an ounce – in other words, the price is much, much higher than the base price, which also suggests that gold is much too high and will come down,” says Mecklai.
According to Apurva Sheth, Head of Market Perspective and Research at Samco Securities, gold is to touch the golden number of Rs 1,48,071!
Sheth explains – The above chart is a ratio chart of MCX Gold to CNX 500. When it was first published on 29 February 2024, the ratio was trading around 3. Today the ratio is trading above 4 levels, which means gold has outperformed equities and is not in the mood of stopping.
In the past, this ratio has moved up to levels of 7. A what-if scenario analysis was conducted for gold and CNX 500 prices, if the same levels were to hit this time around too.
If CNX 500 stays at current levels and gold prices move up, then the upper limit for gold works out as Rs 148,071. If Gold stays at current levels and CNX 500 falls then the lower limit for CNX 500 works out as 12,257, which is 42% below current levels. “Now these are just wild scenarios but it covers all possibilities. What materializes can be somewhere in the middle of these two extremes,” says Shah.
Also Read: Gold vs. Sensex: A 20-year analysis reveals crucial lessons for asset allocation
Gold and You
Remember, Sensex or gold touching 1 lakh mark are just milestone numbers and have got nothing to do with your personal wealth creation. As a long-term investor, choose to be diversified in equity, bonds, and gold.
Enough research has shown that proper asset allocation is the key to meet your goals without shuffling and risking your portfolio. Yes, it will be big news all over the media, but your investments in gold need not stop at Rs 1 lakh. Nor should it be the reason for you to start investing in gold all over again. Just stick to your planned asset allocation and do the needful.
Also Read: Gold reserves of global central banks are rising. Should you also accumulate gold?