Transcription
Today, we are going to talk about war and gold. So, normally, when war starts, gold prices go up. But after the tensions between Iran and the US increased, gold prices actually fell here. Meaning, if we talk from a price point of view, from almost $5200-$5300 per ounce, prices are now around $4300 per ounce, and I am specifically talking about the situation after February 28th. If we talk about this in Indian Rupees, the price in India was around 1.65 lakh per 10 grams, which has now fallen to almost a fall of 45,000 in Indian Rupees. Because the import duty has been increased from 6% to 15%. And that was the reason gold prices immediately went up in Indian Rupees. But now, if we are seeing, these tensions have started again. The US attacked Iran again. Iran again attacked the US air bases in Kuwait. So, in a way, war has started again, and despite gold normally getting the tag of a safe-haven asset, here gold prices are coming down. So, we are going to try to understand this particular relationship in this video.
Friends, usually when there is war in the world, investors pull money out of the stock market and invest in safer havens, meaning gold, because gold is considered a safe-haven asset. That is why whenever there is war, gold prices go up. But if we talk about a dangerous side effect of the conflict between Iran and the US, it is the explosion of oil prices. So, oil prices have already gone up from $60-$70 per barrel to almost now $98-$99 per barrel. We have even seen prices up to $120 per barrel. And when oil prices rise, the fear of inflation increases significantly all over the world. So, let's try to understand its correlation a bit.
So, if there are high oil prices, it means petrol prices become expensive. Transport becomes expensive. Manufacturing becomes expensive. Oil prices impact almost everything. Meaning, their prices are going up. What does this mean? This directly means inflation is going up. To control inflation, central bankers increase interest rates. Specifically, if we talk about the US Federal Reserve, whether they will increase prices here or not, we do not know. But currently, the interest rates in the US are on the higher side. So, there is a very high chance that they will continue. Now, the new Federal Reserve chairman has arrived. For a few days, he will listen to Donald Trump. Whether he will cut rates or not, we do not know. But Mr. Donald Trump is pushing for that. But the situation is not allowing the chairman to act like that. So, if we talk about the 10-year G-Sec yield or the 30-year G-Sec yield, the 10-year yield in the US is 4.5%, and the 30-year yield is more than 5%. So, it means that the scenario of higher interest rates will continue here, and this is where gold gets stuck.
So, the problem with gold is that gold does not give any interest. Just like you get interest in an FD, or you get bond yield in bonds, or dividends in stocks, nothing like that happens with gold. So, when US interest rates remain high, investors start putting money into bonds or dollar assets instead of gold. And that is what is happening. So, we have already seen that after the war, the US dollar has strengthened a bit, and a strong dollar means gold becomes more expensive for international buyers because if the dollar goes up compared to other currencies, then obviously, gold purchases are made domestically. If we have to buy gold domestically, we will buy it in Rupees, and if the Rupee has depreciated against the dollar, then gold is expensive for us. So, this also starts playing a factor on the broader level of demand. Demand weakens there. You might say, "But imports are increasing in dollar terms." The reason for imports increasing in dollar terms is also that our overall, if we talk about it in Rupee terms, due to the depreciation of the Rupee, that number seems higher to us. But in dollar terms or quantity-wise, it has not increased. So, demand weakens here. So, because prices have gone up, and that is why there is pressure on gold prices.
So, in the current market, two forces are fighting. The first force is of war fear. So, normally, war fear supports gold, and inflation and higher interest rates pull gold down. If we talk about both these factors, the second factor, i.e., inflation and higher interest rates, seems more powerful now compared to war fear. And that's why in this war situation, gold prices are actually going down. So, that is why gold does not automatically increase in every war. If war impacts oil prices, takes oil prices up, and forces the Fed to keep rates higher, then in that particular case, gold can also fall. And that is what is currently happening.
Now, the next move will depend on how the Iran-US stocks turn out. Will there be a real deal? What will be its impact on oil prices? And what decision will the US Fed take on interest rates? So, all these things will depend on all these factors, and gold prices will remain dependent on these for a while in the shorter duration. I hope you found this video informative. If you think we are doing good work, do not forget to visit our website, invst.in. Friends, the red color is slightly smeared everywhere. Therefore, this red promo code is active. Visit invst.in, use the red promo code, and get attractive discounts on our research products. Our model portfolios have beaten benchmarks quite handsomely. So, do try our model portfolios, friends. So, meaning, quite handsomely, if you look at it when you subscribe, you will see everything. But the methodology and all those documents are available on our website. So, visit invst.in, friends, and subscribe to our model portfolios. We have also launched global portfolios, so you can subscribe to those as well, and talk to the relationship sales team, friends. Give us leave until the next video. Jai Hind.