Gold prices ahead of Dhanteras, Diwali: Domestic gold prices have rallied nearly 30% in the past one year and are now hovering around Rs 80,000 per 10 grams level for the last one week. Since last year’s Diwali on November 10, the precious metal has seen its price jump from Rs 60,750 to Rs 78,700 per 10 grams, showing a rise of around 30%, according to Indian Bullion and Jewellers Association (IBJA) data.
Despite the yellow metal’s prices hitting record highs, the demand has not slowed down this festive season and is expected to breach the psychological level of Rs 80,000 per 10 grams before this Diwali. Diwali will be celebrated on October 31 this year.
In 2024 alone, domestic gold prices have surged more than 23%, beating returns from equities by a fair margin. The domestic equity benchmark Sensex has given 10.79% this year.
Will gold prices breach the Rs 1 lakh mark by Diwali next year?
If this rally in gold continues, the price will easily cross the Rs 1 lakh level by next Dhanteras and Diwali considering that the yellow metal has surged nearly 30% since last November. Expecting a similar return over the next year, the precious metal’s price will be around Rs 1,03,000 per 10 grams by Diwali 2025.
As of October 23, 2024, the Indian Bullion and Jewellers Association (IBJA) published rates for gold as follows: Fine Gold (999) 24-karat at Rs 78,703 per 10 grams, 22-karat gold at Rs 72,092 per 10 grams.
Gold is one of the best long-term assets which offers both safety and decent return to its investors. Domestic gold prices have seen a two-fold rise in the last five years and 10-times growth in little over two decades.
There are multiple factors, domestic and global both, responsible for driving the prices of gold and silver in the last couple of years. One of the major demand driving factors was geopolitical tensions in different parts of the globe. In early 2022, Russia-Ukraine war broke out, boosting safe haven appeal of gold among investors globally, and the Middle East tensions further fuelled this rally since October 2023.
Rahul Kalantri, VP Commodities, Mehta Equities Ltd, said, “Gold prices soared to record highs, and silver surged to fresh 12-year peaks on Monday, following the Chinese central bank’s decision to reduce its 1-year and 5-year prime loan rates by 25 basis points. This move bolstered demand for safe-haven metals. However, the prices later eased from their peaks due to gains in the dollar index and rising U.S. 10-year bond yields.”
“Gold stands to benefit from potential de-dollarization efforts by BRICS and other nations. Silver has mirrored gold’s rally, being a fellow precious metal. However, the strengthening of the dollar and U.S. bond yields could cap further gains. Gold finds support between $2,710 and $2,680, with resistance in the range of $2,745 to $2,761. For silver, support lies between $33.52 and $33.30, while resistance is at $34.15 to $34.42,” Kalantri added.
Also read: Gold Rates Before Dhanteras and Diwali: Check out gold prices from top jewellers
Gold’s performance in emerging markets in 21st Century
Gold has delivered superior returns in local currencies across emerging markets, driven by economic and political instability, which often weakens currencies and boosts gold prices, according to DSP Mutual Fund Netra Report – October 2024.
“Including gold in a portfolio acts as a hedge against volatility, protecting against risks while enhancing overall returns. For investors in emerging markets, gold offers both stability and growth potential in uncertain times,” the report said.
In India, the returns from equity markets in the 21st century stood at 13.8%, while gold returns were slightly lower at 12.3%, the report showed.
In the 21st century, various emerging markets have shown different returns in equity and gold investments. For instance, Argentina led with equity returns of 38.4% and gold returns of 44.3%, giving it an excess return of 6%. Turkey also performed well, with equity returns of 21.2% and gold at 29.3%, resulting in an 8.1% excess return.
Other countries like Brazil, Poland, and Chile had modest returns in both equity and gold, with Brazil showing 8.6% in equity and 14.3% in gold. Interestingly, India had an equity return of 13.8% but a lower gold return of 12.3%, leading to a slight negative excess return of -1.5%. Overall, these figures highlight the varying performance of investments in emerging markets.