Market Trends
Gold prices stood at Rs 60,282 per 10 gm, and have since risen to Rs 78,577 per 10 gm marking a significant increase of over 30% since Diwali 2023. This surge in demand can be attributed to:
• expectations of rate cuts by central banks worldwide
• escalating geopolitical tensions in the Middle East and Ukraine
• strong buying from Central Banks to reduce dollar reserves
• Strong demand in the festive season
Gold seems to be breaking out of a channel and is now at a 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 the 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 more than 20%.
Historically, whenever the US Federal Reserve has cut rates, Gold has outperformed the Metals Index. Clearly shown below: correlated movement of Gold and Fed rate.
Towards the end of the year, there is close to a 100% probability of a 100bps cut in the US Fed Funds Rate.
The bull run in gold is unlikely to fade away any time soon. The US Presidential election is creating a lot of volatility in the global financial markets, with gold gaining due to volatility in other asset classes. Besides input for jewellery and asset class, gold is a safe haven for investors during times of uncertainty. It is a hedge for investors against any uncertainty and price volatility.
Investors should closely monitor economic indicators and geopolitical developments in the Middle East and Ukraine for potential impacts on gold prices while staying attuned to buying opportunities amid the bullish trend,
The best-suggested way of investing in Gold is through Gold-bees ETF preferably or go with a Sovereign Gold Bond, 8-year bond with a 2.5% interest rate in half-yearly payments, cost-efficient with no storage, easily tradeable in the stock exchange (if in need), and redemption after maturity is exempt from capital gains tax. The chances of the new issue of SGB coming into the market look low so investors should buy Gold ETF.
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 central banks.
Robins Joseph, SEBI Registered Investment Adviser, Certified Financial Planner. Founder of MyGuide2Wealth (www.myguide2wealth.com) based in Noida specialising in wealth, investment, and retirement services with the clear aim of spreading financial literacy and advocating on India’s strong equity story
