Predicting future precious metals values, particularly gold, is not an easy task. However, there is persistent market conjecture that gold prices may reach an all-time high of Rs 70,000 per 10 kilos by the end of 2024. Though it may appear unlikely, multiple economic variables and market movements support this projection.
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Risk factors may propel prices
According to Adhil Shetty, CEO of BankBazaar.com, "Gold performs well during periods of high inflation and economic uncertainty." Gold returns tend to be increasingly important when economic risk factors increase. There has been talk that gold prices may reach Rs 70,000 in 2024. The continuance of risk factors such as high inflation and geopolitical worries amid poor global economic development may lead to additional gold appreciation."
According to Jateen Trivedi, VP Research Analyst at LKP Securities, the trajectory of gold prices reaching Rs 70,000 in 2024 is dependent on a number of fundamental factors. Given the current situation, prices of about Rs 66,000 appear reasonable. However, an exceptional bull market scenario might drive prices to Rs 70,000."
Fed stance critical
"One significant driver is the US Federal Reserve's (Fed) attitude on inflation and interest rates. If the Fed decreases interest rates significantly in June or July 2024 in response to lower inflation levels around 2.00%, gold prices could rise sharply. "The longer the Fed maintains accommodative monetary policy, the more likely gold will reach Rs 70,000," added Trivedi.
As previously indicated, geopolitical tensions, particularly in the Middle East, play an important influence. Rising tensions tend to boost gold prices, but they can also exacerbate inflationary pressures owing to disruptions in cross-border commerce. As a result, any escalation in international tensions could accelerate the journey to Rs 70,000.
Wait till June
According to Sachin Kothari, Director at Augmont Gold for All, "In the first week of December 2023, gold prices reached a new record high of $2150/oz in international markets and Rs 64400/10 gm in domestic markets due to the reemergence of geopolitical tensions in the Middle East and increased speculation that the Fed will begin cutting interest rates in March 2024, following a series of rate hikes in the previous 20 months. However, in the previous two months, the picture has shifted slightly, with the chance of a rate decrease moving to June 2024, as inflation is not falling quickly enough.
Following the COVID-19 epidemic, the global economy has seen a paradigm change, with central banks throughout the world lowering interest rates to near-zero levels. Gold, with its non-yielding nature, becomes an appealing option in such a low-interest rate scenario. Gold consumption is also expected to rise as consumers in emerging nations, particularly India and China, boost their spending power.
Investors have always viewed gold as a safe haven during times of economic distress. "There is still a possibility of gold touching $2300/oz (~ Rs 70000/ 10 gm) by the year's end if the FED starts cutting rates from the June meeting and other fundamental factors keep the prices supported," Kothari said.
Thus, investors should attentively monitor the factors to determine the likelihood of such a result.
It is also worth noting that these are estimates that are subject to change based on real-time global developments, policy changes, and market sentiment. Investors should take caution and examine a variety of factors before making an investing decision, including their financial goals, risk tolerance, and investment horizon.
To summarize, while gold prices could reach Rs 70,000 by 2024, they are still vulnerable to speculation due to specific economic and market variables. Regardless, gold remains a popular and dependable investment option.
Furthermore, Shetty advises against speculating or evaluating gold based on its long-term performance history. Gold is a great performer in unpredictable times, and it can help increase your portfolio. When stocks face obstacles, it often performs well as an asset class. Investors find this stability to be comforting. Diversification with gold must be consistent with individual risk tolerance and return expectations. You can steadily and deliberately amass gold for your portfolio, treating it as a marathon rather than a sprint. "When risk factors decrease, gold returns will soften." As a result, possessing the appropriate proportion of gold—say, 5-10% of your holdings—may be preferable for growth-oriented investors. Hold for the long term to maximize rewards," Shetty said.
