What is the RISK of investing in GOLD at this moment?
25th April 2025
What is the RISK of investing in GOLD at this moment?
Dear Investors,
Namaste! From 2006 to 2025 – I have played a full gold cycle from Rs.8000 per 10 grams to Rs.1 lakh per 10 grams now. While point to point movement may look 12X – the journey of the gold price was never smooth. Today I will take 100 years of Gold price data and try to see the RISK for the NORMAL investors who are more than eager to buy gold.
Last 100 years price movements: -
In 1925 – the gold was costing Rs.18.75 per gram. It is now Rs. 1 lakh. Around 9% CAGR return. The problem with the India prices is – they consist of 3 factors – International Gold Prices + Gold Import Duty + Rupee Depreciation against the USD.
So, the gold prices look smoother. But when you look at the prices in USD we get a different picture.
From 1929 to 1971 – the US was following the GOLD standard so the Gold prices were linked to the DOLLAR. So, there is no point in considering the GOLD price data for the period between the first 50 years.
If we look at the data from 1971 onwards – the gold price was USD 40 per ounce. It moved 21 times in the 9 years and made a peak of USD 850 in 1980!! Average price was around USD 600 USD per ounce. ( Indian prices moved up from Rs.193 per 10 grams to Rs.1330 per gram.)
It fell to USD 330 in 1982!! Until 2003 it remained below USD 400. Now, from 1982 to 2003 is 21 years. So, for 21 years it didn’t move at all. Average was around USD 300 only.
It made a high of USD 1855 in 2011. So, Gold moved up from USD 350 something in 2003 to USD 1855. Close to 440% gains or 4.5 times growth. This performance has come after 21 years of under performance. So, those who invested at the high of 1980 at USD 850 – barely doubled the money in 2011 – assuming he held for 30 years!!
Story doesn’t end here. Gold made a low of USD 1062 per ounce in 2015. 43% fall from the Top it made in 2011.
It touched USD 1800 again in 2020. It means it took 9 years to make the same high again. It means those who bought in 1980 had the same return in terms of absolute amount 2020. Just doubled in 40 years!! If you apply the rule of 72 – Gold return is little over 1.5% per annum!
Now, if you are in India – we used to have 15% FD rates in 1980 and early 1990. It we take absolute return of just 7% on FD from 1980 – we are better holding FD compared to GOLD.
What is the best case SCENARIO in Gold prices from here onwards?
Various estimates keep gold at Rs.2 lakh per 10 grams. If we assume the same import duty and exchange ratio – Gold should touch USD 6500 per ounce.
Will it go ? I don’t know.
Those who are buying GOLD at this time should remember the investor who had bought the gold at USD 850 per ounce in 1980. He was also super bullish and he had all the reason to believe that Gold will go up at the time of buying. We know what happened to the GOLD prices in the next 40 years!!
What can change this time?
We have seen that in the first 50 years – we had two world wars but the price of gold was kept steady by the USA. In the next 50 years – Gold has moved from USD 40 to USD 3300 now. Close to 75X.
At this moment Gold is freely traded and CHINA is trying hard to take control of the gold price decision from the USA and LONDON METAL EXCHANGE.
We have WAR like situations also. We are going towards the financial RESET also as per our last blogs. World over central banks are buying gold as if there is no tomorrow. AS per today’s report – RBI added 57.5 tons of GOLD in the year 2024-2025 against US bonds. They are buying at the current prices and when they are buying – it is safe to assume that gold prices are not likely to fall drastically and may double also from here.
However, if I look GOLD purely from an investment perspective – I have better options in terms of Equities / Cryptos. The advantage of equities will be – it will double faster and you will get yearly dividends also.
However, if I look at the emotional perspective only – I will keep some gold in my portfolio as an asset class with a minimum 15 years horizon in mind.
What NEXT?
Keep above DATA in mind while you jump and buy gold.
Follow me on Twitter @hiteshmparikh /
Learn a Lesson. Live with Passion & Invest with Reason.
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