Gold has captured the attention of investors and financial enthusiasts globally, with its remarkable ascent to unprecedented levels. Surpassing $3,000 per ounce on the international stage and ₹90,000 per 10 grams in India, the allure of this precious metal is a hot topic in everyday discussions. In 2024, gold outperformed the Nifty index by delivering a striking 20% increase compared to the Nifty’s 8.7% gain, and this upward trend has continued into 2025.

Stellar Price Surge

This year, gold prices have escalated from approximately ₹78,000 to ₹93,000, marking a near 20% gain in just over three months. Since August 2024, the yellow metal has surged from around ₹70,000, translating to an impressive 33% increase within eight months. Delving further back, since February 2024, when gold was valued at ₹64,000, it has appreciated by about 45% over the past year. Over the last five years, gold’s trajectory has been nothing short of phenomenal, more than doubling in price and achieving a compounded annual growth rate (CAGR) of over 16%.

While the Nifty index has outperformed gold recently, largely due to the robust post-COVID bull market of 2020-21, the yellow metal has consistently kept pace with equities and, at times, even surpassed them.

Future Outlook: Will Gold Continue to Shine?

The pressing question on many minds is whether gold prices will maintain their upward trajectory or take a pause. To answer this, we must consider the key factors influencing gold prices.

1. Trade Wars and Economic Uncertainty

Trade tensions, particularly those initiated by the U.S. administration, have significantly bolstered gold’s reputation as a safe haven. As tariffs increase under President Donald Trump, the allure of gold as a protective investment becomes even more pronounced. This escalation has raised fears of a global trade conflict, posing a threat to economic stability worldwide.

• The U.S. has implemented substantial tariffs that affect nearly all trading partners, creating a ripple effect on international relations.
• While India has managed to negotiate and mitigate some impacts, other nations may respond with retaliatory tariffs, leading to broader economic repercussions.

Investor sentiment is shifting towards defensive strategies, with many reallocating funds from stocks to gold amid rising uncertainties.

2. Inflation Concerns

Historically, gold has served as a hedge against inflation, a trend we are witnessing now. Should inflation rates in the U.S. rise in 2025, gold prices are likely to follow suit. The risk of inflation has escalated alongside trade war fears, with Trump’s policies potentially triggering higher inflation rates in the short term.

• Financial markets are acutely sensitive to inflation news, and the growing inflationary pressures are providing additional support to gold prices.

3. Fears of a U.S. Recession

The ongoing trade war has unsettled global markets, leading to increased fears of a recession in the U.S. The expectation was that if tariffs caused economic slowdown, the administration would ease its stance; however, that does not appear to be the case.

• Countries affected by these tariffs are likely to retaliate, creating unpredictable second and third-order effects on global trade and economic growth.
• Historically, gold tends to perform well during periods of economic downturn, reinforcing its appeal as a safe investment during uncertain times.

Could Gold Prices Reach ₹100,000 by 2025?

In short, it is indeed plausible. Market sentiment surrounding gold is overwhelmingly positive right now. Many investors are contemplating selling off stocks to hold onto gold until the current market volatility subsides.

While this strategy may not be advisable for the long term, the immediate focus for many remains on short-term gains. With bullish sentiment dominating the market, the mantra “sell stocks, buy gold” is becoming increasingly popular. However, investors should remain vigilant and monitor any shifts that could impact gold prices.

Conclusion: A Balanced Approach to Gold Investment

At Equitymaster, we advocate for maintaining 5-10% of your portfolio in gold consistently. However, it’s crucial not to view gold as a substitute for other assets. While including some precious metals in your long-term investment strategy is wise, speculating on short-term price fluctuations can be risky.

When considering an investment in gold, aim for a time horizon that extends well beyond 2025. Recent price increases don’t automatically indicate that gold is a guaranteed investment. Conduct thorough research and make informed decisions.

Happy investing!