Is gold becoming a golden investment opportunity?
In the year 2019, the prices of gold on an average increased by 13 per cent on yearly basis. However, most of the increase was observed in the second half of 2019 while, the first part of 2019, remained quite benign in terms of the price movement of gold. The graph below clearly shows how the price of gold has moved up from mid-June 2019. It was hovering around Rs 3,000 per gram in June and is now at Rs 3,800 per gram.
This price movement had expected repercussions on the demand of gold. According to the data released by World Gold Council, the jewellery demand, which forms 48 per cent of the total gold demand, is down by six per cent on yearly basis for 2019. In the same period, the demand for investment has increased by nine per cent and for ETF products, it has quadrupled.
| | 2018 | 2019 | Change | Year-on-year % change |
| Total Gold demand | 4,400.96 | 4,355.67 | ▼ | -1% |
| Jewellery | 2,240.19 | 2,107.04 | ▼ | -6% |
| Technology | 334.79 | 326.62 | ▼ | -2% |
| Investment | 1,169.76 | 1,271.70 | ▲ | 9% |
| Total bar and coin | 1,093.57 | 870.64 | ▼ | -20% |
| ETFs and similar products | 76.19 | 401.06 | ▲ | 426% |
| Central banks & other inst. | 656.23 | 650.32 | ▼ | -1% |
| Source: Metals Focus, World Gold Council | | | | |
Future Outlook
Besides the normal demand and supply what also impacts the gold prices is strength or weakness of US Dollar. What also guides the gold prices is economic crisis when it is considered as safe haven. Looking at the government’s effort to keep lid on bond yields and accelerated quantitative easing, the gold prices will have limited scope to repeat its 2019 performance.