In March 2023, gold price crossed Rs. 60,000 for just 10 grams of 24-carat gold in India, and as of May 15, 2023, the price for 10 grams of 24-carat gold is around Rs. 63,000 in India. 

Why are Gold Prices Increasing? 

It is believed that gold prices often increase when there’s uncertainty in the economy. 

Therefore, the present increase in gold prices is a result of an uncertain global economy as enraged by many factors including banking instability, recession, and the Ukraine-Russia war.

Effect of Ukraine-Russia War on Gold Prices

One important result of the war between these countries is that the demand for gold has risen worldwide. 

According to the World Gold Council (WGC), since 1967, when the dollar took the place of gold as the reserve backup, central banks of countries such as India, China, and Russia have been purchasing substantial amounts of gold reserves. 

Other countries such as Turkey and Uzbekistan bought gold reserves because of other reasons. It is said that the trend was started by Russia because it was locked out of its $600 billion in foreign reserves by the United States (US) and the European Union (EU) in February 2022. This was when Vladimir Putin, the President of Russia, invaded Ukraine. 

Seeing this, other countries thought that if the West could do this to Russia, then they could also be targeted one day. 

Well, China is the most worried because of its friction with the US, and for this reason, it bought around 50% of the total gold reserves.

Therefore, countries have started stocking up on gold to diversify their holdings because of two reasons. One, because of the arbitrary influence held by the Western countries, and second, to hedge against risks posed by their unstable economies. 

Effect of the US Economy on the Soaring Gold Prices

As the world has been witnessing, the value of the dollar is constantly fluctuating because of the US economy. This is because the collapse of banks such as the Silicon Valley Bank and Signature Bank indicates trouble going on in the US financial system.

Moreover, the collapse of other global financial institutions such as Credit Suisse also highlighted how relying too much on the dollar could be dangerous.

Therefore, the call for de-dollarization has come up because of the ongoing Ukraine-Russia war and the unstable economy of the US. 

It must be noted here that de-dollarization doesn’t mean that the countries would stop using the dollar. It means that they would rely more on gold reserves than on trading using the dollar.

Is Investing in Gold Good?

Talking about India specifically, then Rahul Jain, President and Head at Nuvama Wealth said that gold had undoubtedly served as an inflation hedge and haven at times of global instability caused by the pandemic, war between Ukraine and Russia, and most importantly, the ongoing US banking crisis.

Jain further suggested that investors should allocate 10% of their portfolio to gold, therefore saying in favor of gold. 

Therefore, wealth managers and investment consultants frequently advise their clients to include a little amount of gold in a diversified investment portfolio.

How to Invest in Gold?

There are many ways in which one could invest in gold depending on their budget. 

A few gold investing methods are as follows:

Gold IRAs

Because you must use an IRS-authorized account custodian, pick only certain kinds of coins and bars, and keep the gold at an allowed depository. These sorts of retirement accounts allow you to buy gold. 

Gold Stocks

One could also purchase individual stocks in gold-related companies that mine or process this valuable metal. 

Gold ETFs

There are some exchange-traded funds (ETFs) that hold either gold or its assets. So, one could buy shares of ETFs, which allows the buyer to customize how much exposure is wanted in the category. 

Gold Futures

One could place bets in favor of or against the performance of gold by purchasing futures. But to do this, one needs to work through a brokerage to accomplish this.

Published By Naveenika Chauhan