As Gold Price Hits Rs 1 Lakh Mark, Here’s Why It’s Seeing A Sharp Rise? Will Rates Fall?

SOURCE : NEW18 NEWS

Last Updated:April 22, 2025, 10:20 IST

Gold Prices Hit Rs 1 Lakh: Anuj Gupta, head of commodity and currency at HDFC Securities, that any decline in the precious metal should be considered a buying opportunity.

The gold prices hit Rs lakh per 10-gram on Tuesday, giving major nightmare to middle class Indians. While many may now have to toil extra to build on their precious metal assets, it’s the Indian housewives who are known for saving and accumulating gold jewellery over the years.

Kotak Mahindra Bank founder Uday Kotak too acknowledged this instinctive investment acumen of Indian households. “The performance of gold over time highlights that the Indian housewife is the smartest fund manager in the world,” Kotak wrote in a post on X (formerly Twitter).

But why is gold seeing such a sharp rise? Will it ever fall? — these are some of the key questions that new investors would like to know, especially at a time when sovereign gold bonds too have been discontinued.

Why Is Gold Seeing Sharp Rise In Prices?

• The rise in gold prices can be largely attributed to the weakened US dollar, making gold more attractive as a safe haven asset. The ongoing trade conflict between the US and China heightens market uncertainties, further driving up gold prices. Typically, such global market volatility steers investors towards gold, seen as a stable investment. This increase in gold prices significantly reflects the current market dynamics and economic sentiment.

• Buying Spree: Reports stated that central banks, especially those in Asia, have significantly increased their gold purchases to mitigate dollar volatility. The World Gold Council reported that global central banks acquired 1,037 tonnes of gold in 2024 alone, marking one of the highest accumulations ever recorded. This indicates a strategic shift away from reliance on the US dollar, motivated by inflation concerns, geopolitical risks, and the pursuit of long-term currency stability.

• ‘Stagflation’: Federal Reserve Chair Jerome Powell has recently warned that the US economy could face a “stagflationary” environment, characterized by persistent inflation alongside slowing growth. This scenario has further enhanced gold’s attractiveness as a safeguard against both economic stagnation and rising prices. Moreover, geopolitical tensions in regions such as the Middle East and Eastern Europe are driving a risk-averse attitude among investors, leading many to turn to gold.

• Recession Risk? Concerns about an impending American recession are significantly influencing the market. Goldman Sachs recently raised its recession probability forecast to 45 percent. Additionally, a substantial selloff in US Treasuries indicates declining confidence in what is usually considered secure government debt. With interest rates declining, gold has once again become a favored store of value.

Will Gold Prices Fall?

Anuj Gupta, head of commodity and currency at HDFC Securities, commented on the outlook for gold prices amidst the stock market surge. He noted that the factors driving gold prices are still in play, making a significant drop unlikely. He further advised that any decline in the metal should be considered a buying opportunity.

“Triggers that have fueled gold prices still persist, and hence, chances of a sharp fall are very low. Global brokerage Goldman Sachs has improved its gold price target from $3,300 per ounce to $3,700 per troy ounce. In high-risk cases, Goldman Sachs has predicted gold prices to touch $4,500 per ounce. So, bull trend in gold prices is expected to continue, and any dip in the yellow metal should be seen as a buying opportunity,” Gupta was quoted by Mint.

Navneet Damani, senior vice president and head of commodity and currency research at Motilal Oswal, shared his perspective on whether gold prices will hit Rs 1 lakh for short term.

“The outlook for gold price remains constructive. Persistent trade tensions, inflationary pressures, and central bank gold purchases will continue supporting prices,” he was quoted.

Damani further advised gold investors to maintain a ‘buy on dips’ strategy. “With the global economy navigating through policy uncertainty and slowing growth, gold is likely to remain an attractive asset class. In an environment dominated by policy uncertainty, inflationary pressures, and volatile geopolitics, gold remains a beacon of stability. As central banks bolster their reserves and investors seek safety, gold will remain a favoured asset. Barring any significant resolution in global trade tensions, we maintain a ‘buy on dips’ view from a medium to long-term perspective,” Mint quoted him as saying.

Jateen Trivedi of LKP Securities echoed a similar view. He stated that gold’s momentum has been driven largely by uncertainty over tariffs and trade talks. “Unless there is a diplomatic breakthrough, the metal is likely to remain elevated in the short term,” he was quoted.