Gold prices, which had recently soared to an all-time high of Rs 1 lakh, have started to decline as global conditions improve and stock markets recover. This shift has led to a reduction in demand for gold as a safe investment, with investors turning their attention back to equities.
Just a week ago, gold was trading at record levels due to global uncertainty. Factors like trade tensions, US tariffs, and various geopolitical issues had driven investors toward gold, traditionally seen as a safe haven during times of instability. However, the landscape has changed in recent days, with global conditions stabilizing.
Meanwhile, stock markets have demonstrated strong performance. The Sensex has surpassed the 80,000 mark, and the Nifty has reached its best level of 2025 so far. This recovery has revived investor confidence in equities, making gold less attractive by comparison.
Gold's Future Appeal
Trivesh, the Chief Operating Officer of Tradejini, highlighted that both gold and stocks serve different purposes in an investment strategy. He noted that gold had seen significant gains over the past year, up over 30% since Akshaya Tritiya 2024 and more than 200% in the last decade. These rises were largely driven by global market volatility, trade restrictions, and rising oil prices. In India, gold holds not only investment value but also cultural significance, symbolizing prosperity and security during festivals and family events.
While acknowledging the recent correction in gold prices, Trivesh emphasized that this was a natural outcome as global tensions eased. However, gold still retains its appeal as a reliable store of value, particularly during times of uncertainty. He also pointed out that equities, such as those in the Nifty 50, offer potential for growth. The Nifty has bounced back 12% from its low in April, but with heightened market expectations, there is a risk of a correction if company earnings fall short.
Trivesh advised investors to adopt a balanced investment approach, suggesting a mix of gold and equities based on individual risk tolerance and financial goals. “Gold protects you from market ups and downs. Equities help your money grow over time,” he said.
Why Are Gold Prices Falling?
The recent fall in gold prices is largely attributed to improved global trade conditions. US Treasury Secretary Scott Bessent recently stated that several major trading partners, including India, had proposed strong measures to avoid US tariffs. He also mentioned that a trade deal with India could be signed soon.
Additionally, China has decided to remove tariffs on certain US goods, signaling a reduction in trade tensions. The US has also indicated plans to ease the impact of auto tariffs, steps that are expected to enhance trade relations between major global economies.
Jateen Trivedi, Vice President and Research Analyst for Commodities and Currency at LKP Securities, noted that the decline in gold demand was linked to these developments. Hopes for a China-US trade deal and potential peace between Russia and Ukraine have diminished the need for gold as a safe-haven asset, further reducing its appeal. As trade relations improve and geopolitical tensions ease, investors are less inclined to seek the security of gold, shifting their focus back to equities.
