Gold price trends in India: factors influencing rates in 2024
- In 2023, over 48% of mined gold was utilized for jewellery production, with India and China being major markets.
- Rising gold prices tend to decrease demand for jewellery, while low interest rates increase gold's appeal as an investment.
- Forecasts suggest that gold prices could reach $3,000 an ounce by 2024-2025, influenced by various macroeconomic factors and demand dynamics.
The global demand for gold in 2023 was significantly influenced by its use in jewellery, with over 48% of mined gold allocated for this purpose. Major markets like India and China view gold jewellery as a store of value, which drives consumption. However, as prices rise, the demand for gold in jewellery production tends to decline, indicating a sensitive relationship between price and consumption patterns. In addition to jewellery, gold's role as an economic indicator is crucial. The expectation of rising real interest rates typically exerts downward pressure on gold prices. Conversely, when interest rates are low, the demand for gold increases, as lower government bond yields make gold a more attractive investment option. The dynamics of gold demand are further complicated by geopolitical factors, such as ongoing conflicts in regions like Ukraine and the Middle East, which have bolstered gold's appeal as a safe-haven asset. Non-Western central banks are also increasing their gold reserves to diversify and mitigate credit risks, contributing to price stability. Looking ahead, forecasts suggest that gold prices could soar to $3,000 an ounce by 2024-2025, driven by a combination of reduced production, macroeconomic influences, and sustained demand for jewellery. The Reserve Bank of India's measures may also lead to an appreciation of the rupee, potentially increasing gold demand further by the end of 2024.