Satish Singh
Gold has evolved beyond its traditional role as mere adornment; it is increasingly recognised as a significant non-official currency. In the international market, the price of gold has soared to an impressive $5,190 per ounce. Meanwhile, in the domestic Indian market, its value has surged to over Rs 1.59 lakh per 10 gram.
Remarkably, since September 2024, gold prices have shown resilience, avoiding any substantial or sustained decline, signalling not just a temporary upturn but also profound structural changes within the global financial landscape. This sustained price elevation can largely be attributed to increasing investment interest, particularly from traditional investors. After reaching new heights, gold prices have exhibited a stability lasting 8 to 9 months, hinting at a potential shift in market dynamics. Over the last two years, gold investing has become especially appealing. In September 2024, the price crossed the Rs 75,000 mark for the first time, and although it dipped slightly shortly thereafter, gold prices have consistently trended upward.
As of January 29th, the valuation exceeded Rs 1.75 lakh, and it currently hovers around Rs 1.6 lakh. Given current trends, it’s unlikely that gold prices will fall below Rs 1.3 to Rs 1.4 lakh in near future. Traditionally, rising interest rates lower gold prices because gold doesn’t pay interest. However, from 2023 to 2025, this trend has changed.
Despite higher interest rates, gold prices are gaining momentum as investor sentiment shifts. Many investors are losing trust in government bonds amid rising interest in gold as a non-government currency. Gold’s value is now influenced by market conditions, geopolitical factors, and economic indicators rather than government authority.
Additionally, the depreciation of the rupee has made gold investments more appealing, leading to a rise in gold ETF investments. In the long-haul perspective, gold is increasingly perceived not just as a hedge against risk but also as a vital strategic asset. Concerns regarding instability across regions, including Western Europe, the Middle East, and Asia, are driving investors to withdraw from the dollar-centric financial system.
In response, global central banks have collectively acquired an impressive 1,000 tons of gold over the past four years, attempting to diversify away from reliance on dollar assets. Compounding this situation, the supply of gold is currently constrained, as no new mines have been launched, and the lead time to bring new mines online is considerable. SEBI has allowed active equity schemes to invest in gold and silver, expanding their previous allocation of 20-35% to debt and non-equity instruments. This change aims to mitigate stock market losses by leveraging gains in gold and silver during equity downturns. Projections suggest gold prices might rise by 20% and silver by about 14% by 2026-end.
Gold demand surged by 29% in 2024, the highest growth since 2013, largely driven by millennials. Around 65% prefer investing in digital gold, ETFs, and mutual funds over physical gold. In early 2025, gold ETFs saw a 60% increase in participation as consumers shifted to digital gold for wealth preservation and inflation protection. While digital gold is popular in urban areas, rural populations continue to favour physical gold or loans secured against it. Current trends indicate that gold prices are rising, with minor fluctuations, and tend to stabilise following each peak, greatly enhancing the predictability of future trends. While it has not yet achieved official status for direct transactions, gold is steadily gaining acceptance as an alternative currency, with individuals increasingly embracing it as a viable non-official currency.
The writer is a senior banking and economic columnist based in Mumbai.
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