Gold prices are likely to continue their upward trajectory amid ongoing global uncertainties. Factors such as geopolitical tensions in the Middle East, South Asia, and Eurasia are contributing to this trend, raising questions about whether the current surge is a temporary spike or the beginning of sustained momentum, experts say.
Gold breaching $1,170 per 10 grams signals a historic high, driven by global economic uncertainty, geopolitical tensions, and the weakening of major currencies, Renisha Chainani, Head of Research at Augmont, India’s largest integrated gold firm, spanning refining to retailing, told Sputnik India.
While short-term corrections are possible, the long-term trend appears bullish. Central banks continue to buy gold, inflation concerns persist, and safe-haven demand remains strong amid volatile global markets, she added.
"Unless there's a significant shift toward global economic stability or a sharp rise in interest rates, gold's momentum is likely to be sustained. Investors, however, should remain cautious and consider gold as a diversification tool rather than a primary growth asset. The rally seems more structural than temporary," Chainani stressed.
Gold retains purchasing power over time and its prices typically rise when inflation rises and currency weakens, making it an effective shield against inflationary pressures. During crises, like wars, pandemics, or banking collapses, investors flock to gold, the bullion trader explained.
Its recent surge aligns with global tensions and concerns over monetary policies. Between 2014 and 2024, the price of 24-karat gold in India rose from approximately $450 to $930 per 10 grams. This translates to a Compound Annual Growth Rate (CAGR) of about 11% over the 10 years, she highlighted.
Gold has universal acceptance. It's highly liquid and can be sold almost anywhere in the world. Central banks, particularly in emerging markets, continue to accumulate gold, which supports long-term demand. Unlike equities or debt instruments, gold carries no counterparty risk, Chainani noted.
"You're not relying on a company or government to pay you back—it's a tangible, intrinsic asset. Gold is less volatile than equities but more productive than fixed-income assets over the long term. It works best as a portfolio diversifier, increasing the overall risk-adjusted return of a portfolio," the commodities specialist underlined.
Another precious metals dealer, associated with a leading Indian bank, who wanted to remain anonymous, agreed with Chainani's assessment.
The recent surge in gold prices is likely a sustained trend, driven by global uncertainties and a shift towards safe-haven assets. While the immediate factors like trade wars and a weakening dollar are significant, the underlying trend of increasing central bank gold reserves and investor demand for gold Exchange-Traded Funds (ETFs) suggests continued upward pressure, he stated.
Gold has a proven track record of delivering positive returns over the long term. It tends to perform well in both good and challenging economic environments, the expert reckoned.
Gold's negative correlation to equities and other risk assets tends to strengthen during market sell-offs, helping cushion portfolio losses when it matters most. At the same time, gold often shows a positive correlation when markets are rising. This dual behaviour makes gold a consistently reliable and effective diversifier across market conditions, the Delhi-based analyst underscored.
"The gold market is large, global, and highly liquid, with no credit risk, and known for its scarcity and ability to preserve value over time. Gold plays a crucial role as a long-term strategic investment and a cornerstone of any well-diversified portfolio. Not only is it beneficial during periods of uncertainty, gold can also deliver long-term returns across various economic cycles," he summed up.