Central bankers behaving like Indian housewives: Nilesh Shah on why gold price is rallying

On Tuesday, Gold prices surged to an all-time high, breaking the key $3,000 level internationally, while reaching a new peak of Rs 88,513/10 g on MCX.

In a recent ET Now interaction, Nilesh Shah, Managing Director of Kotak Mahindra Asset Management, pointed out that central banks globally are now behaving like Indian households by accumulating gold as a hedge against currency risks. «Fortunately for India, central banks of the world have become like our housewives. They have realised that keeping money in dollars, yen, euro, renminbi, and securities is risky, as Russian central bankers have realised. Now they have joined the bandwagon and they are buying gold as much as Indian housewives are buying.»

He attributed this surge to sustained demand, explaining, «Today, gold prices are up because we are one of the largest buyers.»

Shah also highlighted gold’s current strength, stating, «Yes, undoubtedly, gold looks on a better footing. It has delivered great returns like equity.»

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Despite gold’s bullish trend, Shah raised an important question: «We will have to figure out when Indians decide to sell gold, who will buy.» While gold is a valuable asset, its long-term investment viability depends on its ability to be liquidated at the right price when needed, unlike equities where buyers and sellers are readily available.

Also read: Gold m-cap hits $20 trillion milestone for the first time. Are you late to the party?

Amid gold’s strong footing, domestic brokerage firm Motilal Oswal, in a report, has also