“2020 turned out to be unprecedented in the scale and degree of uncertainty. Gold naturally was one of the best performing assets for investors driven by high risk, low interest rates and price momentum. However lifetime high prices in all currencies and lockdowns in key global markets pushed consumer demand to its lowest levels.
2021 will continue to see an interplay of many of these factors but underpinning a favourable environment in India for both gold price and demand. The sharp rise in price of gold by 20% has now reset consumer expectations about a new normal. Higher risk of stock prices driven by liquidity, low interest rates, coupled with the inevitable return of family and social occasions and the experiential value of gold buying will release pent-up demand. This could mimic the strong growth seen in 2010 and thereafter, after one of the sharpest dips in gold demand in 2009, following the uncertainties created by global financial crisis.
Innovative marketing efforts of big players and digital interventions are here to stay and all-round efforts to enhance trust in the jewellery industry to mitigate price impact will shape millennial behaviours positively towards gold.”
The report assesses how low interest rates present an opportunity to add risk assets in the hope that economic recovery is on the immediate horizon. It highlights how investors could be navigating potential portfolio risks including:
- ballooning budget deficits
- inflationary pressures
- market corrections amid already high equity valuations
Overall, World Gold Council believes gold investment will remain well supported while consumption should benefit from the nascent economic recovery, especially in emerging markets.
-Somasundaram PR, Managing Director, India, World Gold Council.
