Will gold prices gain or fall after making new record highs in long-term?
Gold prices have scaled sharply and even delivered better returns than the Nasdaq index over a 2-year period.
Gold prices are on an upswing with no imminent selling pressure in the near-term as per experts. After notching a fresh high of over Rs 89,000 per 10 gm on the MCX, gold April contract has marked a fresh high of Rs for the second straight day on Thursday (March 20, 2025).
Gold prices internationally
Gold prices have hit a new milestone internationally too with April futures contract hitting a peak of $3,065.95 per ounce.
Gains today propelled on Fed's view of possible two rates this year
Even as Fed held on to its key policy rates, policymakers signalled possible rate cuts going forward, providing a push to precious yellow-metal.
Lower interest rates increase gold's appeal
Gold gets a push amid lower rates as gold is a non-yielding asset and lower interest rates in the economy reduce the opportunity cost of buying into gold.
Gold getting push amid heightened geopolitical uncertainty
Escalating geopolitical tensions in the Middle East are also adding to the gains in the precious yellow metal. Furthermore, US tariff fiasco is also seen to lead to inflationay situation, increasing gold's appeal as an inflationary hedge.
Gold price gains amid depletion in reserves
News reports also suggest that decline in reserves of central banks such as Bank of England are also adding to gains.
Experts on gold rise
Ajay Bagga on gold's stupendous gains said that there has been significant safe-haven buying in the metal. Also, gold ETF flows have been robust.
Central bank's buying has increased significantly
Over the last 3 years, central banks have been buying gold as much as 1000 tonnes. While considering the market forces, while demand has been on a higher side.
Record 75% gains since November 2022 in gold
Stressing on gold's exorbitant rally, Bagga mentioned that since November 2022, gold has yielded 75 per cent, far better than Nasdaq.
Bagga calls this exceptional performance as unusual
Bagga remarking stupendous gains given by the precious metal cautions investors that only an up to 5-10 per cent allocation in gold will be suitable for an overall portfolio.
Why such caution?
Bagga believes that after an exemplary performance- gold may not deliver return for the next 4-5 years, so investors should avoid taking huge bets and instead should take positions only in a staggered way.