“Gold will remain relevant for investors as a portfolio diversification mechanism with a “likely ascending importance” as an asset class in the coming years,” Chief Economic Advisor V. Anantha Nageswaran said on Monday (March 3, 2025.)
Speaking at the IGPC-IIMA annual gold and gold markets conference 2025, he said gold will remain relevant not only as a store of value, as an ornament for cultural and religious purposes, but also as an important portfolio diversification mechanism “until such a time the world is able to arrive at an international monetary system from the current international monetary non-system”.
“That day of reckoning is very difficult for any one of us to prophecy at this stage,” Mr. Nageswaran said.
The value of gold has increased by more $200 per ounce or 8% in the last three months to $2,860 per ounce. At the same time, the Indian stock markets have fallen more than 8% over the last three months.
Since 2002, the value of the precious yellow metal is up 10 times when it was about $250-290/ounce. In the Indian market, the price of gold per 10 gm stood at around ₹85,000. India is a net importer of gold.
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He said it is very important to remember the relevance and the importance of gold for a portfolio, a store of value etc, more so against the backdrop of the likely ascending importance of gold in the coming years.
Mr. Nageswaran also hoped that India will find ways to productively deploy the gold assets that it has without diluting its role as a symbol of store of value as well as cultural and religious significance. “That is where the policy challenge lies,” he said.
Mr. Nageswaran said India needs to reflect upon its past gold monetisation efforts to pay back the owners who deposited gold in currency form. “…but probably people attach different significance to gold and sometimes we tend to forget that in policy deliberation,” he added.
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To wean away people from physical gold, the government had announced Gold Monetisation Scheme in 2015, which allowed people to deposit their gold with banks to earn interest. The scheme aimed to reduce India’s reliance on gold imports.
He said that gold not only symbolises solidity but also policy discipline and, in a way, it also should have symbolised investor discipline.
“Today what is happening is that, not only policymakers think that they can print their way out of any trouble, investors also think that they are entitled to rising prices of assets of all types and therefore clamour for reliefs, forgetting the fact that the financial markets are a two-way street, the clamour for policy relief increases with every passing day when the market declines,” Mr. Nageswaran said.
He further said that today the global debt to GDP ratio is in multiples of the GDP and when such high levels of debt accumulates, debt becomes deadweight because future earnings are required merely to service the debt and not so much is available for development expenditure.
Also, with such high debts, the countries will be tempted to use inflation as a means to pay down the real value of debt.
“So given that the fear of inflation is still there and the world is witnessing the after effects and the consequences of policy discretion that commenced in 1973, gold’s importance will continue to remain very salient and high,” Mr. Nageswaran said.
Under the Fiscal Responsibility and Budget Management Act, 2003, the Centre’s debt-to-GDP ratio in FY26 is seen falling to 56.1% from 57.1% in FY25. At the same time, India’s GDP growth is seen growing 6.5% in FY25 and in the range of 6.3-6.8% in the next fiscal.
Published – March 03, 2025 12:55 pm IST
