Gold prices offer a glittering 200% return in 6 years: Can the yellow metal continue to shower gains on investors?

Gold, often revered as a timeless store of value, has delivered dazzling returns to Indian investors over the last six years. From approximately ₹25,000 per 10 grams in 2018 to over ₹75,000 in 2024, the yellow metal has offered a staggering 200% return, outperforming several traditional asset classes. As global economic uncertainties linger and central banks remain cautious, many investors are now wondering: Can gold sustain its upward momentum or has the rally peaked?

A Six-Year Golden Run: What's Behind the Surge?

Between 2018 and 2024, gold’s ascent has been powered by a confluence of factors — geopolitical tensions, fluctuating interest rates, inflationary pressures, and central bank buying.

“In these years, gold has played its classic role as a hedge against uncertainty. The trade wars, COVID-19 pandemic, Russia-Ukraine conflict, and inflation spikes post-2021 all created a fertile environment for gold prices to rally,” said Anuj Gupta, Head of Commodity & Currency at HDFC Securities.

In rupee terms, gold’s performance has been especially stellar due to a weakening currency. While international gold prices jumped from around $1,300 to $2,400 per ounce, the depreciation of the Indian rupee from ₹65 to nearly ₹83 per US dollar has amplified returns for Indian investors.

Central Banks and ETFs Fuel Demand

The World Gold Council (WGC) reported that global central banks have been net buyers of gold for the past several years. In 2023 alone, they purchased over 1,000 tonnes, signaling strong institutional confidence in the metal.

“Central banks, especially from emerging economies, have been accumulating gold as a strategic reserve diversification move. That long-term demand is underpinning prices,” noted Ravindra Rao, VP and Head of Commodity Research at Kotak Securities.

Moreover, gold ETFs and sovereign gold bonds (SGBs) in India have witnessed robust inflows, reflecting increased retail participation. The Reserve Bank of India’s SGB schemes have garnered ₹65,000+ crore since inception, reinforcing investor trust in gold-backed instruments.

Inflation, Interest Rates, and Dollar Movement

Gold typically thrives in low interest rate environments, as the opportunity cost of holding the non-yielding asset diminishes. Between 2020 and 2021, ultra-loose monetary policies by global central banks helped gold rally sharply.

Even after rate hikes post-2022 by the US Federal Reserve and RBI, gold remained resilient due to persistent inflation and safe-haven demand.

“Investors are betting that interest rates globally will plateau and eventually fall, which bodes well for gold. The dollar index has also shown signs of softening, further supporting the yellow metal,” said Sriram Iyer, Senior Research Analyst at Reliance Securities.

Domestic Factors: Import Duties, Festive Buying, and Rupee Impact

In India, seasonal and cultural factors also play a pivotal role in gold demand. Festive seasons like Diwali, Dhanteras, and the wedding season traditionally witness a surge in physical gold buying.

The Indian government’s 15% import duty and GST on gold have kept domestic prices elevated. However, these measures have not dampened demand significantly, especially for investment-grade and digital gold products.

Additionally, currency depreciation has made gold imports costlier, indirectly inflating domestic prices and adding to returns for Indian investors.

Can Gold Sustain Its Rally?

Analysts remain cautiously optimistic about gold’s future performance.

“We may not see another 200% jump in the next six years, but a 7-10% annualized return looks achievable. Gold is now more of a portfolio stabilizer than a high-return asset,” explained Naveen Mathur, Director, Commodities and Currencies at Anand Rathi Shares.

The outlook is influenced by several potential catalysts:

• Global Recession Fears: Economic slowdown in major economies could trigger safe-haven buying.

• Geopolitical Risks: Escalation in regions like the Middle East or Eastern Europe can increase demand.

• Rate Cuts in 2025: If central banks pivot to easing monetary policy, gold prices may find fresh tailwinds.

• Green Energy Push: Industrial demand for gold in electronics and renewable sectors is also growing steadily.

Investment Options: Physical vs Digital Gold

Indian investors today have multiple avenues to invest in gold — physical bars and jewelry, gold ETFs, sovereign gold bonds (SGBs), digital gold via fintech platforms, and gold mutual funds.

SGBs, in particular, are gaining traction due to the 2.5% annual interest and capital gains tax exemption if held till maturity. ETFs offer liquidity and flexibility, while physical gold continues to enjoy sentimental value.

“Digital gold is catching up fast among young investors who want small-ticket, instant, and secure investments,” added Archit Gupta, Founder & CEO of ClearTax.

Investor Outlook: Diversification Still the Key

Financial advisors suggest keeping 5-15% of the portfolio in gold, depending on risk appetite and financial goals.

While equities and real estate may offer higher long-term returns, gold remains an important diversifier — especially in volatile times.

“Investors should view gold as a risk mitigator rather than a return-maximizing asset. It’s best used to balance your overall portfolio, especially during inflation or crisis periods,” concluded Renu Yadav, Senior Personal Finance Analyst at Mint.

Gold’s 200% return over six years may not be repeated in the near term, but the yellow metal continues to shine as a hedge, a diversifier, and a long-term wealth preserver. Investors eyeing the next phase of economic turbulence may find that gold still has plenty of sparkle left — just not in leaps and bounds.