Gold Prices are expected to go up in 2021 – Should you invest?
Gold prices have been on the rise in the last 2 years. In the last 5 years, gold prices have increased by almost 100%. There are several factors that are showing up a signs that gold prices are expected to go up in 2021. In such a case, should you invest in a gold now? Which are the best gold investment options available now?
A quick check on history of Gold Prices
Here is the history of gold prices in the last 20 years per 10 grams. One should note that average prices may vary by city.
2000 – Rs 4,400
2005 – Rs 7,000
2010 – Rs 18,500
2015 – Rs 26,343
2020 end – Rs 51,500
Why Gold Prices are expected to rise in 2021 in India?
Here are some reasons why gold prices are expected to increase in 2021 in India.
#1 – Covid-19 and New Strain (2.0)
While we all might be happy about the vaccine being made available shortly, new strain is again putting pressure. It was observed in the past that pandemics have created uncertainty that would push gold prices.
#2 – interest rates
Due to covid-19, we could see Govt of India not touching the interest rates. However, in coming quarters, once the economy is back to stability post covid situation, interest rates are expected to fall. Such fall in interest rates, would push gold prices upwards.
#3 – US – China relations – No major changes expected from current
There is no need to explain the reasons in details about this. This is another major cause of concern which would push gold prices upwards.
#4 – Countries are accumulating gold
Generally, countries would keep buying and selling gold reserves. However, in the recent times, many countries are holding their reserves. Some countries even increasing their gold reserves due to this pandemic. This is another reason gold prices can go up.
#5 – Lower supply of gold due to Codiv-19 pandemic
Due to covid-19, supply of gold has reduced in the last 6-9 months. While the situation would improve in coming months, this also might put further pressure and gold prices rising.
#6 – Fall of US 10 year bond yield
This is another important factor that has driven gold prices in 2020. Generally, when bond yield increases, there is less attraction towards gold as gold by itself would not generate any income. Due to fall in US 10 year bond yield, funds are flowing towards investments into gold.
#7 – Weak Rupee
This is another common phenomenon seen in gold prices rising. If rupee is weak against dollar, gold prices seen rising. We are currently seeing that the rupee is trading at 73 per dollar. The dollar was available at Rs 70 at about a year back. Strong dollar is putting pressure to gold prices to rise.
#8 – Pumping cash to boost economy
Several countries are planning in various ways to come out of this covid-19 loss. Countries are printing trillions of dollars and pumping money to boost their economy. This would rise, inflation. We all know that inflation and gold are best friends. Such pumping of money would push gold prices further up.
Also Read: Top 15 Mutual Funds to invest in 2021
Should you invest in Gold in 2021?
All these factors indicate that gold prices are expected to increase in 2021. Like I indicated in our earlier articles, investment in gold should be done based on your need. If you still want to diversify and make gold as part of your investment portfolio, you can invest 5% to 10% in gold. You can consider investing in sovereign gold bonds, gold funds and gold ETFs. Don’t buy physical gold as investment unless you need it in future.
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