Gold price has risen meteorically in 2024 and there are a number of signals that suggest there could be more propulsion in the barrel. The commodity hit an all-time high of Rs 73,958 in mid-April, but has since eased down to trade at Rs 70,746 at the time of writing. There has been much talk regarding a potential move to Rs 1 lakh in 2024. However, the geopolitical risk that has been driving prices up has cooled down recently, diminishing the chances of that happening.
Gold is very much ingrained as part of the Indian culture, and households’ appetite for the commodity is unlikely to be shaken despite the spike in prices. Gold prices rose three-fold in the last nine years, but the market rally seen in the first quarter of 2024 was particularly outstanding. However, the defining factor of gold prices in India in the coming months and years is likely to come from geopolitical forces and central bank-driven demand as opposed to jewelry. Also, China has emerged as a force in the gold market since last year, with its central bank stocking up its gold reserves for seventeen straight months.
Furthermore, Chinese retail buyers raised their appetite for gold in the wake of underperforming equities markets and a troubled property market.
What could move gold prices in the next five years?
According to Bloomberg, China’s jewelry purchases rose by 10% in March. Meanwhile, India’s investment-driven demand for gold rose by 19 percent in the first three months of the year, while jewelry demand rose by 4 percent. According to World Gold Council, India bought 136.6 tons of gold during that period and is projected to buy between 700-800 tons in 2024. Furthermore, the Reserve Bank of India bought 19 tons of gold in the first quarter, up from 16 tons in the first quarter of 2023.
Looking ahead, there’s a good chance that while investment-driven demand could push prices up, it could push down jewelry demand, which constitutes three-quarters of demand in India. For instance, there was a notable weak demand for gold jewelry during this year’s Gudi Padwa festival. If this trend persists, it could put a lid on gold price gains. On a global scale, US interest rates are likely to continue impacting gold prices well into 2025. In addition, US treasury yields will also influence the price of non-yielding gold. These assets traditionally have an inverse relationship.
Inflation will have a traditional relationship with gold prices in the longer term. Most economies are still struggling with the post-pandemic inflationary pressures, and that is likely to continue driving investors towards gold. The United States, in particular, is expected to keep interest rates elevated, as inflation remains stubbornly above the target rate of 2%.
Technical analysis
Following the recent gold price rally, and in view of the underlying inflationary pressures, gold is likely to pivot around 74000. In the medium term (2024-2026), the metal is likely to swing between lows of 60000 and highs of 82187. Beyond that period (2027-2029), gold will likely trade between 65941 and 90172. Generally, however, a move above 82,187 will favour the bulls, while a move below 65941 will swing the action toward the sellers.
