
Why Investors Are Worrying Over Rising Gold Prices
Seasoned investors are celebrating and worrying because gold's rising prices signify's something going wrong in the future with the global financial system

On Episode 698 of The Core Report, financial journalist Govindraj Ethiraj talks to Anindya Banerjee, Head, Research, Currency and Commodity, Kotak Securities as well as Sidharath Kapur, Founder and Board Member at Refex Airports and Transportation.
SHOW NOTES
(00:00) Stories of the Day
(00:41) Why investors are worrying over rising gold prices
(04:33) Markets stand by for earnings signals
(13:00) UK says no work visas
(14:38) How Mumbai’s new airport could change traffic patterns
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Thursday, the 9th of October and this is Govindraj Ethiraj broadcasting and streaming. Weekdays from Mumbai, India's financial capital are top stories and themes.
Why investors are worrying over rising gold prices.
The stock markets are standing by for earnings signals.
The UK says there are no visas for skilled Indians.
And how Mumbai's new airport could change traffic patterns.
Gold And More Gold
Rising asset prices usually leads to a degree of happiness, perhaps joy, because it means wealth expansion or creation. But that's not quite the case with gold.
Seasoned investors are celebrating and worrying at the same time because rising prices signify that there is something going wrong now and in the future with the global financial system or elsewhere. Not surprisingly, central banks are also buying to exit among other things, their dependence on the dollar, but also to create a hedge against uncertainty. Dan Smith, our managing director of commodity market analytics told Reuters that the rally is unbelievable, telling us that something bad is happening and that we should be nervous.
Bridgewater Associates founder Ray Dalio said investors should allocate as much as 15% of their portfolios to gold even as it crossed $4,000 an ounce. He said that gold is an excellent diversifier in the portfolio at the Greenwich Economic Forum in Greenwich, Connecticut, in the United States. According to him, if you look at it just from a strategic asset allocation perspective, you would have something like 15% of your portfolio because it is one asset that does very well when the typical parts of the portfolio go down, CNBC reported him saying.
The billionaire investor compared the environment right now to the early 1970s in the United States when inflation, heavy government spending, and high debt loads eroded confidence in paper assets and fiat currencies. He said that it's very much like the early 1970s, where do you put your money in when there's such a supply of debt and debt instruments, it's not an effective storehold of wealth, CNBC quoted him saying. The Wall Street Journal says that on Wall Street, this is known as the debasement trade when investors worried about the future of the dollar and other major currencies and are piling into gold, bitcoin, and other alternative assets.
The gold rally of 2025 is unusual in that it has not been fuelled by a financial meltdown, says the Wall Street Journal, adding that a 52% gain in futures this year is on track to outpace similar surges during the first year of the COVID-19 pandemic, the 2007-9 recession, and trailing only the inflationary shock in 1979. As investors make increasingly speculative bets that the AI boom will continue, they're also looking for ways to shield themselves from potential fallout of US policy dysfunction, including widening budget deficits and the current government shutdown. This is pushing them into assets not denominated in dollars, the Wall Street Journal says.
So gold has jumped about 12% in September alone, and this is also taking prices of silver, platinum, and palladium higher as well. The general consensus amongst analysts seems to suggest that there is nothing that's stopping this rise. Also remember, it's doubled in the last three years and picked up steam after Russia invaded Ukraine and the tensions in the Middle East.
Meanwhile, back home, India's physically backed gold exchange-traded funds, or ETFs, saw their largest monthly flow in September, pushing assets under management to a record $10 billion as investors bought more of that precious metal, according to Reuters. Higher inflows into ETFs will also lift gold imports into India, which is also the world's second-biggest consumer. Now, the increase in imports will obviously widen India's trade deficit and put pressure on the weaker rupee.
We'll have more on gold in a moment. And in the stock markets, the benchmark equity indices were down after losing some of their initial gains on Wednesday as caution took over. The Sensex was down 159 points to 81,773, while the NSE Nifty was down 62 points to 25,046.
In the broader market, the Nifty mid-cap 100 and small-cap 100 indices were down 0.7% and 0.5%, respectively. Oil prices were up over 1% on Wednesday, thanks to a smaller-than-expected output hike from the Organisation of Petroleum Exporting Countries Plus next month, though there are concerns about oversupply, which curtailed further gains. Crude futures were up $0.82 to $66.27 on Wednesday morning, according to Reuters.
How's Q2 Looking?
So, what's the outlook for the latest or second quarter of the current financial year, 2025-2026? Well, we are going to be showcasing several views in the next few days, but here's a report from Kotak Institutional Equities, which says that net income for their KIE universe will increase 7.9% or just under 8% year-on-year, led by automobiles and components, thanks to a low-to-high single-digit year-on-year increase in volumes due to early festive season and positive retail momentum, which in turn is linked to cuts in tax rates, that's the goods and services tax, and lower retail prices, also offset by higher discounts across most segments. The other sector where they're seeing growth is diversified financials, that's because of an increase in overall disbursements for most companies and a reduction in funding costs. The next area is IT services, steady margins led by rupee depreciation combined with cost control measures.
The next is metals and mining, a strong quarter for base metal players due to high commodity prices in that second quarter. And finally, oil, gas and consumable fuels. On the other hand, what kept things down or dragged things down were banks, which saw subdued loan growth, net interest margin compression, consumer staples, which saw no uptick in demand ahead of festive season, although there is a GST rate cut triggered short-term impact on volumes and margins, and real estate, which will also report a year-on-year decline in the net income, according to that report.
It also says that they expect net profits of the BSE30 index to increase about 7.9%, that's just under 8%, and the Nifty 50 index to increase 5.4% year-on-year.
The Gold View
So gold, as we've said, has crossed $4,000 an ounce for the first time on Wednesday as that record-breaking rally continued.
Spot gold was at about $4,036 per ounce on Wednesday morning, and gold futures had crossed $4,058 an ounce. So gold, as we've been saying, is up about 54% year to date after gaining about 27% in 2024. It is quite obviously one of the strongest or best-performing assets of 2025 and has outpaced global equity markets and Bitcoin.
To discuss all this, I reached out to Anindya Banerjee, Head, Research, Currency and Commodity at Kotak Securities, and I began by asking him how he was seeing the rise of gold.
INTERVIEW TRANSCRIPT
Anindya Banerjee: Thank you for having me, Govind. The structural factor for gold is that the de-dollarization, which is basically the central banks accumulating gold, because whenever they have to move from a particular monetary order to a new monetary order, the gold is accumulated. And that's what is happening.
The central banks are diversifying their fiat currency reserves towards gold. That has been the structural theme for some years now. Now, what has added to those factors is a lot of institutional allocation started happening from early this year.
And last couple of months, we have seen significant amount of money rotate from the crypto, from equity, and other parts of the commodity market, because the gold ancillary market is catching a lot of momentum and is one of the best performing asset classes in the world and also in India.
Govindraj Ethiraj: So one reason is de-dollarization in as much as central banks are buying. But the other reason, of course, seems to be apprehension about what's going on in global markets with the United States and so on, isn't it?
Anindya Banerjee: Absolutely. So when I look at Fed, when I look at the US economy, the whole structure looks like a stagflation. You have a situation where if we leave aside their CPI numbers, the true cost of living, the cost is significantly rising.
And at the same time, growth is not able to pick up that much. So a stagflationary situation makes it hard for the central banks to basically make a choice between which path to take, growth or inflation. And with Trump over there in White House, he's trying to pressurise the Fed to take the path of growth, which means they have to sacrifice inflation and that can go even higher.
So when you have a situation like that, when the central bank is compelled to move away from its core objective of inflation for other objectives, that's when the currency gets into trouble. This is just not the case with US. It is the case now with Japan.
It is the case with a lot of countries in Europe. So basically, the common theme is that the fiscal and monetary policies are becoming unanchored and it's becoming quite messy. If I look at the entire commodity spectrum, especially the metals, the hard commodities, they are all going up and they're all trying to say that it's a kind of a vote of no confidence against the fiat system.
They have started to price in the inflation. Gold and silver is basically the ones which will price it the most. And that's what we are seeing.
Govindraj Ethiraj: Right. So you talked about central bank buying and that's true. We've been seeing it for more than a year, I guess now actively, including countries like India itself, China, Turkey, and many others.
My question really is that does central bank buying or do you see it continuing regardless of how price moves and therefore driving up prices further? Or could there be some limit that they may be setting or have set?
Anindya Banerjee: Actually, there is no hard and fast rule to figure out how much the central banks can buy. But they have been largely a price agnostic buyer, but they have accumulated a significant amount of gold reserves. It's very hard to say how much it will continue to happen, but it's already a significant portion of the reserves as of now.
And if you were to look at it from an India point of view? The beauty of the RBI's FX reserves is that we really don't know how much of it is in dollars. Yeah, they publish the data in dollars because that's the convention.
They translate everything else into dollars. Unless somebody has a clue as to how much is in dollars, because we are talking about de-dollarization, right? So we are talking about the major economies of the world moving away from a single reserve currency to something else, a basket of things.
That being the case, unless and until we have a clue of how much of it is in dollars. Let's say if we take the data which the US Treasury had put out a couple of months back about India's investments in the US Treasury. If I take that number as a proxy for the amount of FX assets in dollars, it's around 50%, which is very interesting.
I don't know whether that should be taken as the only number or not. The actual dollar reserves of the overall FX reserve is quite small. So having that into perspective and having the gold that we have already invested, it is a decent size.
Govindraj Ethiraj: Technically speaking now, do you see price resistance or resistance at any level where we are right now, including in the Indian context, where we are over 1,18,000 per 10 grammes?
Anindya Banerjee: Yeah, 1,22,000 as we speak on the MCX. If I look at it from the international perspective, the next resistance comes in somewhere around 4,150. But these are just mathematical numbers because unless and until something trades at a price, but if I want to project it mathematically, 4,150 is the next target.
In rupee terms, it comes at around 1,26,000. But what is happening now, if you see, is a very interesting trade which is happening all over the world. Gold, silver, AI stocks, the nuclear stocks, a lot of commodities, they are all rising in cryptos.
I don't know how much of it is just hot money getting allocated into all of these. That can become a major factor that can create a very short-term kind of a move, surpassing all expectations. And then it just corrects.
Govindraj Ethiraj: Right. Some of this, or maybe a lot of this, is going to put pressure on currency as well. And the rupee, of course, has been hovering near its record low now.
So how are you seeing currency in this context?
Anindya Banerjee: Indian rupee has been, very interestingly, one of the weakest currencies this year. In fact, at a time when the dollar index is weak. Now, the last time it happened was 2013.
Now, definitely, we are not in the situation of 2013, which means the trade war between US and India, I think that has created a massive discount. And also, RBI is allowing it to drift lower, the Indian rupee, because that helps the exporters. I think till the trade deal is signed, USD can drift higher.
89 is the immediate level where I think the RBI might try to protect it for some time. Once that is crossed, then 90 can be the level. But once the trade deal is signed, the kind of discount the rupee has already priced in, we could see some appreciation.
Govindraj Ethiraj: Right. Anindya, that's a good note to end on. Thank you so much for joining me.
Anindya Banerjee: Thank you.
UK Visas
If you were looking for relief for H1B workers elsewhere, remember the whole discussion on the $100,000 fee that the United States will impose on fresh H1B visas.
Well, the wait might be longer. Prime Minister Keir Starmer on Wednesday confirmed that the United Kingdom's new free trade agreement with India does not include any fresh visa opportunities for Indian workers. While speaking to journalists on his flight to Mumbai, where he is promoting the deal signed in July, Starmer said the visa situation hasn't changed with the free trade agreement.
We didn't open up more visas. The issue is not about visas. It's about business-to-business engagement and investment and jobs and prosperity coming into the United Kingdom.
He added that allowing more highly skilled workers from India isn't part of the plan. Starmer is leading a delegation of 125 business and cultural leaders to India, several of whom have warned that the United Kingdom's tightening of immigration rules could worsen labour shortages across industries, according to Business Standard. Elsewhere, Wall Street was firm on Wednesday with the S&P 500 rising slightly, a day after it snapped a seven-day winning streak thanks to that drop in share prices of Oracle.
Elsewhere, the next new thing is physical AI. Swiss engineering group ABB is selling its robotics business to SoftBank Group, which sees physical AI as the new thing in a $5.4 billion deal. The deal might sound unusual since robotics in the industry context is growing, but ABB Robotics has not been doing too well financially, despite being amongst the top industrial robotics companies in the world.
So the new thing is physical AI.
A New Airport Is Here
The Prime Minister Narendra Modi inaugurated the Navi Mumbai International Airport yesterday.
Phase one of that airport was inaugurated by him in the presence of Maharashtra Chief Minister Devendra Fadnavis and his Deputy Chief Ministers Eknath Shinde and Ajit Bawar. Although the first phase, which includes Terminal 1 and Runway 1 with 10 bus gates and 29 aerobridges, have been inaugurated, flight operations are only set to start in December. Airport officials said that security sweeps, customs and immigration, team mobilisation, and testing could take up to 60 days or a December launch, as has been reported earlier.
As the court has been pointing out, the airport does lack proper connectivity and public transport to many parts of populated Mumbai, and several critical links will take closer to two years to come into place. It will of course be a boon for those living in Navi or New Bombay, as it was called earlier, and all the way till Pune, that's about 120 kilometres away from there. So how will traffic patterns change now, and how could the airports operate optimally while accounting for this ramp-up phase? I reached out to Siddharth Kapoor, founder and board member of Refex Airports and Transportation, and also board member of the Noida International Airport, and I began by asking him how he was seeing this new creation of capacity.
INTERVIEW TRANSCRIPT
Sidharath Kapur: Navi Mumbai is the second airport in the country. The first one was Mopar in Goa. If you call Goa a city, I mean it's a state, but nevertheless because it's such a small state that two airports were essentially created because there were other considerations.
But let's not digress and get there. That was actually the first twin airport city or state, if you might call it. So Mumbai is the second.
We are going to see Noida after this, then probably there is a second airport in Chennai on the cards. So this displays the growth in the aviation sector in the country. We are now entering a phase where cities will have multiple airports.
That clearly demonstrates that the traffic growth is what is driving the need for more airport infrastructure in the country. How traffic will move between the Mumbai airport and the Navi Mumbai airport, it's a very interesting question. Because Mumbai airport is a very high constrained airport.
Its current capacity is 55 million and probably they can't do more than that. They have been stretching themselves to do as much as possible over the last 10 years. Frankly, Navi Mumbai airport is an airport which is actually about 15 years late.
The tendering was done way back in 2015 or 16, almost 10 years back. The need for this airport was felt long back. And today once it is there, I think the traffic will really fill up the second airport very quickly.
Because Mumbai's traffic is constrained. They didn't have an outlet where to go. So essentially airlines also have been using more wide-body aircraft to accommodate the growth in traffic rather than more traffic movements of aircraft.
The other point to consider is that it's owned by the same shareholder. The shareholder can play an important role to decide how to allocate the traffic in this kind of a situation. That is a scenario yet to be seen.
Nevertheless, I think the domestic traffic growth will move very quickly to the Navi Mumbai airport. And I think there are 2-3 reasons. One is that Mumbai itself is constrained.
The shareholder would definitely like to retain international traffic at Mumbai airport and let go of as much domestic traffic as possible. Though this airport is also an international airport. But having said that, for connectivity purposes and to build a network, you would probably need to have international flights also in the new airport.
But it may not be to the same extent as the Mumbai airport. So the traffic growth on the domestic side will definitely see great traction. The other important point is that Navi Mumbai airport is well connected by road.
It's not too far. I mean from BKC, it takes about 45 minutes. They are talking about metro connectivity between the two airports.
They are talking about waterway connectivity. The connectivity is definitely something which is bound to play an important role. The catchment area is very well populated.
The area ahead of Navi Mumbai, Panvel, Panvel going right up to Pune. This can cater to not just Mumbai traffic because now you also have the Atal Setu where from South Bombay you can reach this airport pretty fast. Bombay traffic will definitely spill over there.
Navi Mumbai has a great catchment area and some parts of Pune also might want to because Pune is also a very constrained airport. It's a defence airport. So there is definitely a case that Pune traffic may shift to this airport.
So I do see great traction and it should see healthy traction in terms of domestic traffic growth. They have built it for a 20 million to start with which I think will get filled up in my sense probably in the next 7 to 10 years.
Govindraj Ethiraj: And just a quick one on the international part. You said that the shareholders would like to retain as much international in the existing airport. Why is that?
Is that because realisations are higher? Airlines don't want to operate in two airports at least the international carriers.
Sidharath Kapur: The domestic guys would want to ideally operate in one airport. But the problem is that if somebody let's say is coming by Emirates and lands at Navi Mumbai, the connection from Navi Mumbai on a domestic route is always a challenge. Similar is the case, you can't effectively today, maybe later if there is a high speed metro link between the two airports and the connection time is reduced maybe to about 45 minutes to an hour, there is a possibility that the network can build across two airports in which case they'll operate as two terminals rather than two airports.
But as of today, international to domestic and domestic to international connectivity is going to be a little bit of a challenge.
Govindraj Ethiraj: What about the cost as obviously this is a new airport, it's 19,000 crore plus, could that impact what passengers will pay when they buy their tickets?
Sidharath Kapur: Yeah, I mean, the regulator has fixed the charges, I think are in the ballpark of about 1500 or so, which is definitely going to add to the cost of travel of a passenger. The question is how do the airlines structure their ticket prices to see that this airport is at par with the Mumbai airport? Here the UDF is about four or five times the UDF at Mumbai.
That is definitely a question to ponder, because it's definitely going to add to the cost of traffic. This is something the airlines would need to factor in, because prime slots are not available at Mumbai. They may have some space slots available in the non prime, but that also, I don't think that too much of it will be available.
So for an airline getting a prime slot, the cost of travel in Mumbai is definitely higher, the ticket prices are higher. Here they'll have to price it lower to factor in these extra airport charges. So my sense is that probably there can be a play around juggling between the airline ticket prices and the UDF which the airport is charging to remain competitive.
Govindraj Ethiraj: Last question, as someone who's worked in this sector for a long time, what is it in your mind or your understanding that makes a great airport? Ease of processing is something which makes a great airport.
Sidharath Kapur: What is a passenger really looking for? It is the quality of service. What is an airline looking for?
It is the service which the airport provides so that they can manage their operations efficiently and seamlessly. So these are the two critical things which are very important. Airports making it very jazzy, having excellent offerings in terms of non-arrow retail, commercial, all that is fine.
It adds to the bottom line of the airport and that's what airports do. They want to maximise their non-arrow revenue. But what makes a very clear good airport is the efficiency of operations, making the processing of the passengers stress-free and quick and that is what makes a difference.
That also has a very significant spill-off on the non-arrow revenues because a less stressed passenger, he'll spend more time in the SHA and at the same time he will be less stressed, his impulse buying is going to be definitely higher. These are the psychological factors which play an important role in airport operations. Airports which are good lay a great emphasis on improving their performance standards.
Govindraj Ethiraj: Thank you so much for joining me.
Sidharath Kapur: All right.

Seasoned investors are celebrating and worrying because gold's rising prices signify's something going wrong in the future with the global financial system

Seasoned investors are celebrating and worrying because gold's rising prices signify's something going wrong in the future with the global financial system