Gold prices have been rising since last three months and touched all time high @ 72400/ 10 gm on 16th April in domestic markets. This surge in demand can be attributed to:
– expectations of rate cuts by central banks worldwide
– escalating geopolitical tensions in Middle East and Ukraine
– strong buying from Central Banks to reduce dollar reserves
Gold seems to be breaking out of a channel and is now at lifetime high. This could turn out to be the beginning of a bull market in precious metals.
For long term investing, Gold must be 10-15% of overall asset allocation.
Not right time to buy in bulk but SIP averaging is best if purchasing through Gold ETF or Gold Bond. No need to increase exposure if you already hold Gold.
Historically, whenever the US Federal reserve has cut rates, Gold has outperformed the Metals Index. Clearly shown below – correlate movement of Gold and Fed rate.
Towards the end of the year, there is close to a 100% probability of a 100bps cut of US Fed Funds Rate.
In short term, this bullish momentum is expected to taper off around levels of 72000 to 72200- Given these conditions, profit-taking in both precious metals is anticipated to be on the horizon. The yellow metal may go up to ₹74,200 per 10 gm mark in the short to medium-term
Investors should closely monitor economic indicators and geopolitical developments in Middle East and Ukraine for potential impacts on gold prices while staying attuned to buying opportunities amid the bullish trend,
Best suggested way of investing in Gold is through Sovereign Gold Bond, 8 year bonds with 2.5% interest rate in half yearly payments, cost efficient with no storage, easily tradeable in stock exchange (if in need), redemption after maturity is exempt from capital gains tax.
Gold is in a sweet spot; it will keep rising if inflation increases or remains high; but will also do well if interest rates are cut by the Central Banks.
