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Gold touched ₹75,000 per 10 gm. Should you buy gold or sell gold at this point?

Posted on 28 Apr 2024
Author: Sayan Sircar

Tags: Gold ; Market Movements

6 mins read
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This article explores the probabilities of gold price movement, both up and down, from current price levels.

Gold touched ₹75,000 per 10 gm. Should you buy gold or sell gold at this point?

📚 Topics covered:

Why has gold reached ₹75,000?
How gold has moved in the short term in India?
How much gold price expected to move in the next few months?
Will gold rise or fall now?
What should you do if you need to purchase gold soon?

Why has gold reached ₹75,000?

Gold Lifetime High

The price of 99.9% purity gold recently (20-Apr-2024) reached a lifetime high of more than ₹75,000/10gm on the back of news of the Iran-Israel conflict. Gold prices, always track the risk of geopolitical risks, and have reached today’s level after a 52-week low of ₹58,000/10gm in October 2023.

This article explores how gold prices have moved in price bands like -5% to 5%, -10% to 10% etc. in India in the short-term (1-month, 2-month up to 1 year) so that investors looking to enter or exit gold can make an informed decision.

How gold has moved in the short term in India?

Gold price movement in the short term in India (data since 2007 to 2024)

The chart above shows rolling gold price returns for various short-term periods (up to a year) since 2007. We have used the beginning of month 24CT gold prices since March 2007.

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How much gold price expected to move in the next few months?

Range	1M	2M	3M	6M	1Y
-5% to 5%	74%	59%	53%	35%	22%
-10% to 10%	94%	88%	78%	65%	42%
-15% to 15%	99%	96%	91%	82%	56%
-20% to 20%	100%	99%	98%	90%	66%
-25% to 25%	100%	100%	100%	96%	76%
-30% to 30%	100%	100%	100%	98%	85%

The table above shows that historically

it is virtually certain that in the short-term (up to 3 months), gold prices do not move beyond the range of +/- 15%
longer the horizon, the more the chances of a sharp movement in either direction
there is a drastic fall in the certainty of price movement as the period goes to 1 year. We reach the 95% level only if we expand the range from -40% to 40%

There is no chance that anyone can predict actual price movements. The best we can do is look at the historical probabilities and extrapolate the trend to short periods only.

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Will gold rise or fall now?

Probability	1M	2M	3M	6M	1Y
Rise	59%	60%	64%	74%	77%
Fall	41%	40%	36%	26%	23%

If we ignore the amount of change and just look at the direction, there is more chance, historically, that gold will rise in the short term. However, these are probabilities. Just like a coin toss does not guarantee either a head or tail, the table does not guarantee any particular direction of movement.

To understand whether to purchase gold now or later:

What should you do if you need to purchase gold soon?

If you must buy gold soon, say for a wedding, you should consider what happens if the gold price actually moves between now and the wedding.

If your target is to buy 100gm of gold (around ₹7.5 lakhs at current prices), as per the data below:

In grams	1M	2M	3M	6M	1Y
95 to 105 gm	74%	59%	53%	35%	22%
90 to 110 gm	94%	88%	78%	65%	42%
85 to 115 gm	99%	96%	91%	82%	56%
80 to 120 gm	100%	99%	98%	90%	66%
75 to 125 gm	100%	100%	100%	96%	76%
70 to 130 gm	100%	100%	100%	98%	85%

There is an 88% chance, for example, that the gold you will end up buying in the next 2 months will be within 90-110gm for the same amount of money. It may not be possible to distinguish, without using a jeweller’s scale, if a piece of jewellery has 90 vs 110 gm of gold. Of course, the best way to accumulate gold for a wedding in the far future is slightly different: What is the best way to accumulate gold for your child’s wedding?

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