Gold has always been considered a safe investment. Especially in India, where the craze of gold jewelery is very high. Indian women have so much gold that the gold reserves of many big developed countries also fall short in front of it. Global tension has increased after Donald Trump came to power again. Especially after his tariff announcement, the mood of Global Economy has changed. Due to this, gold is getting a lot of support and this year the price of gold has increased by 32% in the dollar. Let us understand why there is so much speed in gold?
When the US announced the Global Tariff System, Gold performed brilliantly in the last one month. This is because geo-political uncertainty has increased and the US Federal Reserve is expected to cut interest rates. One of the reasons for the gold growth is to distance the central banks from the US dollar reserve. The dollar has fallen by 11% from the beginning of this year, especially in the first few months. Central banks are not only selling dollars reserve, but also the bond yield has increased in Europe and Japan, which indicates a decrease in demand for government bonds. Gold is gradually replacing other currency.
According to the report of Financial Express, it may happen that gold becomes the main reserve asset, but it does not seem possible right now. For this, the condition of the global economy will have to be worse. Inflation will have to increase everywhere, trade and GDP will have to fall. This has not happened yet. But the recent speed of gold clearly shows that some investors and central banks are worried.
Stir in stock market
The stock market is continuously giving positive signal. This year the Nifty Index is 5% and the S&P 500 index is 9% above. The US stock market is on a record high, and the Indian stock market is also close to its record high in late June. The VIX index measuring the volatility of the US stock market is at 14.5. India VIX index is at 10.1 measuring the volatility of the Indian stock market. Both are around or below their long-term average. There is no indication of bad news from the stock market. The story of gold and stock market is clearly missing. Sona, currency and bond markets are indicating bad news, while the stock market is saying that everything is fine. Late, there will be correction in any one of these markets. The question is, which market will it be?
Retail and Institutional Investors
The imperfect image of retail investors is that they prove to be wrong more often than institutional investors. Retail investors have a huge presence in both gold and stock market. But his share in currency and bond markets is low. Both these markets run mostly on the strength of institutional investors. Looking at the move of bond and currency market, it seems that institutional investors are still pessimistic. Since both gold and stock market are growing together, it shows that retail investors are more optimistic, but they are also keeping their stakes safe. Time will tell which group turns out right. If we look at the history, the institutional investors have performed better than the retail investors.