As we approach the festive week leading up to Diwali celebrations, it is evident that gold and silver prices are currently trading at unprecedented levels. This surge in prices can be attributed to a combination of various global events, economic instabilities, and heightened investor interest. Particularly noteworthy is the recent surge in prices, with gold hitting a record high of Rs 80,650 per 10 grams in India and silver surpassing Rs 99,000 per kg in the national capital.
Further analysis reveals that just last Friday, the MCX gold rate reached a historic high of Rs 77,839 per 10 grams, while the global spot price of gold soared to a new pinnacle of $2,722 per troy ounce. Experts have linked this remarkable escalation in prices to a myriad of influential factors, including geopolitical uncertainties, the possibility of additional interest rate reductions, and the looming US Presidential election.
Such complexities surrounding these factors are expected to prolong the prevailing uncertainty, thereby presenting a challenge for investors striving to ascertain the optimal timing to capitalize on gains and divest in the market.
On Tuesday, the price of gold in India experienced a significant increase. The rate of 24-carat gold rose to Rs 7,982.3 per gram, marking an increase of Rs 240.0. Similarly, the rate of 22-carat gold also increased to Rs 7,318.3 per gram, up by Rs 240.0. In Delhi, the current rate for 24-carat gold stands at Rs 79,823.0 for 10 grams. This is a noticeable increase from Monday’s price of Rs 79,593.0 for 10 grams. Last week, on 16-10-2024, the price for 10 grams of gold was Rs 77,563.0.
Why Gold Prices are on a high?
According to experts, the increase in gold prices can be attributed to various factors such as geopolitical tensions, potential interest rate cuts, and the upcoming US Presidential election. Given these circumstances, gold has become a desirable option for investors looking for a secure asset amid uncertain times. Many are considering purchasing gold before Diwali 2024, a period when gold purchases typically surge for cultural and festive reasons, and holding onto their investment until after the US Presidential election.
What should be your investment strategy?
Financial experts recommend investing in gold leading up to Diwali 2024 due to current geopolitical tensions and the possibility of additional rate cuts, which are contributing to the rising gold prices. Although the market is experiencing an uptrend, there may be some volatility in the weeks leading up to the US Presidential election, potentially affecting gold prices. However, the most significant factor to monitor will be the Federal Reserve’s post-election decision on interest rates, as this could have a significant impact on gold prices.
In India, gold holds cultural and sentimental significance, and purchasing gold during festivals like Dhanteras is considered auspicious. This has made India the world’s second-largest consumer of gold, after China. Demand for gold typically surges during Dhanteras, and this year is expected to be no different. Increased buying by local jewellers to meet festive demand has further bolstered the price rally.
“Gold has always been a time tested asset for Indians because of its wealth preservation-creation properties (over a period of time) and it being very closely intertwined with the cultural fabric of our Country. Indians understand the value of Gold as a wealth preserver and creator probably more than anyone else. Increase in prices actually vindicate this trust of theirs in Gold as a time-tested asset class. Diwali-Dhanteras is one of the two biggest annual Gold buying periods in India and this trend will continue. Whenever prices suddenly change, consumers wait and watch for it to stabilize and then restart their purchases. Saving in Gold in small quantities in a systematic manner over a period of time is what most consumers do and hence the same would continue as well during the upcoming festive period,” said Keyur Shah, CEO – Precious Metals Business, MuthootPappachan Group.
“As global challenges escalate in the Middle East and the European Central Bank hints at potential interest rate cuts, gold prices have surged to unprecedented heights, gaining over 30% this year. Investors are increasingly turning to gold as a safe-haven asset, seeking refuge from economic uncertainty. With the festive season in India underway, the traditional association with gold purchases has fueled a surge in demand for gold investments. While physical gold remains a popular choice, gold ETFs have gained significant traction due to their liquidity, lower costs, tax efficiency, and digital trading convenience. In August 2024, Indian gold ETFs witnessed their best-ever monthly inflow, attracting a whopping Rs 1,611 crore. This surge pushed the total assets under management (AUM) of gold ETFs to a new high of Rs 37,390 crore. Whether you prefer the physical possession of gold or the convenience of gold ETFs, it’s essential to carefully consider your investment goals, risk tolerance, and tax implications,” said Sujit Modi, chief investment office, share.market.
“Due to current market dynamics, a strategic approach to gold investment is essential this festive season. With gold prices hovering near all-time highs, driven by inflation concerns, geopolitical tensions, and expectations of central bank rate cuts, gold will continue its bull run. Gold can act as a hedge against inflation and market volatility, so diversifying your portfolio with a modest allocation to gold 15-20% could balance risk, especially with equity markets showing mixed signals. Investors can adopt a “buy on dips” strategy, looking for temporary price corrections to enter the market at more favourable rates. For those seeking liquidity and convenience, Gold ETFs are an excellent option. They eliminate the costs and risks associated with physical gold storage, making them ideal for short- to medium-term investors. Additionally, Gold ETFs offer price transparency and are aligned with global gold prices,” said Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited.
Disclaimer: Business Today provides market, commodities and mutual fund news for informational purposes only and should not be construed as investment advice. All mutual fund investments are subject to market risks. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.