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NRIs’ gold holdings could prove fruitful
As gold prices rise, NRIs could benefit with gold holdings
Gold prices rose in March 24, to US$852 per 10gm / Canva
The Indian market saw a surge in gold prices, with over 9 percent increase since the beginning of 2024 alone.
The price at the time of writing reached US$852 per 10 grams, a 69 percent increase since the onset of the Covid-19 pandemic in March 2020.
The rise in the recent gold prices was a result of multiple factors. One of them was rooted in the cultural and long time usage of gold as a haven against inflation. Investors and households increased investment in gold as a hedge against inflation, especially during the recent geopolitical tensions in regions such as Ukraine and Gaza.
Another reason for the rise in prices was the low confidence of investors in the US dollar. The confidence regarding US dollar’s stability remained low as the American federal reserve had increased printing and reduced interest rates. Confidence plays an important role in determining savings and investment, especially during a period of fiscal instability.
As gold prices rise and rupee’s value depreciates, gold holdings could serve as a viable investment opportunity for Indians residing abroad. While traditional investment avenues could be constrained for non-resident indians (NRIs), the landscape in gold based investments would be ideal.
During the period from April to December 2023, gold prices remained stable, averaging around US$756 per 10 grams. Since the period was stable, it led to a surge in imports, rising by 26.7 percent to US$36 billion. The prices rose in March 2024, increasing by 10 percent to US$852 per 10 gms. This also resulted in a 90 percent drop in demand.
The Observer Research Foundation also analyzed that the surge in gold prices posed challenges for consumer demand, particularly in the context of the upcoming general election period in India. The increased scrutiny on the movement of gold and cash impacted its demand. The surge in prices could also drive investments into gold-linked financial products.
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