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Gold Price Forecast: What's Driving the Rally and What's Next?

Created on 13 May 2024

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Gold Price Forecast: What's Driving the Rally and What's Next?

In recent months, the price of gold has experienced a significant uptrend, propelled by ongoing global tensions. After stagnating around the ₹64,000 mark from December 2023 to February 2024, gold prices began to surge starting in March. March 2024 saw gold reaching a historic high of ₹70,000, followed by another record peak of ₹76,000 in the same month, with no signs of slowing down.

Gold Performance
Gold prices have surged by ~21% in the last 6 months

But what are the factors fueling this remarkable surge in gold prices? What is the gold price forecast in India, and what's the mantra for capitalising on this rally?

In this article, we will delve into these questions and explore how to maximise gains from the current gold market dynamics.

Factors Driving Gold Price Surge

Before we start this section, it is imperative to understand a few ground rules that gold has historically followed:

  • Gold price is directly proportional to economic uncertainties
  • Gold price is directly proportional to the demand for gold
  • Gold price is inversely proportional to federal Interest rates

The below-mentioned scenarios impact these ground rules, leading to gold prices behaving in a certain manner.

a. Rising tension in the Middle East

The Israel-Iran issue is one of the significant drivers in the gold price rally. “Gold prices are surging after an escalation in the geopolitical tension in the Middle East. The Middle East tension has risen after reports of Israel's “missile attack" in an Iranian city, which has fueled the Iran-Israel war”, said Anuj Gupta, Head of Commodity & Currency at HDFC Securities.

An article from the Arab News mentions, “Israeli war on Gaza is likely to continue and perhaps even worsen.” This will, in turn, affect the gold price forecast in India & lead to a further surge in gold prices.

b. The Chinese Demand

The demand for gold in China has seen a tremendous spike in Q1 2024. The country bought 27 tonnes of gold, pushing the overall national gold repository to more than 2200 tonnes.

This is leading to substantial gold price increases in both US & India.

c. Countries Reducing Dependency from US Dollar

The US dollar used to be the safest currency in the world & countries used to trade in USD. However, after multiple Fed rate cuts since 2022, the dollar index has been fluctuating massively & has become unstable.

The Federal Reserve is expected to announce an interest rate cut towards the end of Q2 2024. This will affect the gold price forecast in India & the US and lead to further gold rally.

To shift towards a more stable currency & reduce the dollar dependency, all countries globally have started stockpiling gold (a stable & safer currency). A prime example of this would be Russia. The majority of the trade occurs in Russian rubles & gold. This, in turn, leads to more demand for gold globally & hence higher gold prices.

Gold Price Forecast: What’s the Prediction?

Now that we have established the fact that gold has a great investing future in the upcoming years, let’s understand where the prediction lies in terms of gold price.

Below are a few predictions from different financial experts:

a. In a conversation with CNBC Awaaz, Mahendra Luniya, Chairman of Vighnaharta Gold, projected that gold rates may reach ₹1.68 lakh per 10 grams by the year 2030.

b. Goldman Sachs predicts that US gold prices, currently trending at the $2300/ounce range, will touch $2700/ounce by year-end. This price, which is over ₹50 crore INR, in turn, suggests strong price appreciation in India as well.

c. Gold prices generally follow a cyclical pattern. This pattern is characterised by extended periods of stability followed by significant breakthroughs. Gold prices remained stagnant between 2015 & 2018 & then surged by 56% in 2019. Similarly, the years spanning 2021 to 2023 witnessed a plateau in prices, followed by a notable rally starting in 2024. These patterns portend a promising trajectory for gold in the upcoming years.

The pattern is illustrated by the below graph:

Price Forecast of Gold

How to Get the Most Out of the Gold Price Forecast in India?

Capitalising on the forecasted gold price surge in India entails strategic thinking and savvy investment choices. While gold has historically delivered an impressive annual return of approximately 11%, the current rally suggests even greater potential returns.

There exists an opportunity to amplify these gains further through a revolutionary asset: Gullak Gold+.

Through Gullak Gold+, investors can enjoy an additional 5% increment in gold grams annually atop the standard market appreciation. This translates to an extraordinary ~16% p.a (11% annual gold appreciation + an extra 5%), surpassing returns from all other gold investments.

There are no lock-in periods with Gullak & investors also get a 100% bank guarantee on their investments when investing in Gullak’s Gold+ investment option. This translates to both flexibility and safety with the asset. For anyone looking to invest in gold & taking advantage of the gold price forecast, Gullak Gold+ might be an asset worth exploring.

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Pratiksha Mahawar

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Sugar, spice & everything nice, that's what Pratiksha is made of. This proactive human makes difficult things look easy through her amazing skill of managing everything, be it professional or academic. Let’s not forget how this “Potterhead” makes room for her ‘occasional writing’ hobby while she leads marketing activities at Finology. 

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