More articles by

Nachiket Kelkar
Nachiket Kelkar

MARKET ANALYSIS

Gold prices rise on global cues, Akshay Tritiya buying

ASIA-GOLD/DEMAND So far in 2017, spot gold prices rose 10 per cent, while prices on the India's MCX gained 5 per cent | Reuters

Gold prices surged in India on Friday, tracking a rise in prices overseas and purchases on the occassion of Akshay Tritiya back home. While the precious metal's returns over the past few years have been lacklustre in comparison to equities, prices globally have firmed up off-late amid rising political risks, and there could be a sustained rally ahead.

Standard gold prices closed at Rs 28,925 per ten grammes on Friday, up Rs 120 over previous day, while pure gold (24 karat) sold at Rs 29,075 per ten grammes, also up about Rs 110. Sales on the occassion of Akshay Tritiya were up about 20-30 per cent, but it should be noted that in 2016, sales in the first half were impacted due to the jewellers strike in protest against government's excise duty levy.

Globally, too, gold prices firmed up on Friday as a weak US economic data (GDP growth of just 0.7 per cent in the first quarter) weighed on the dollar. Gold for June delivery rose close to $2.50 at $1,268.30 an ounce.

So far in 2017, spot gold prices rose 10 per cent, while prices on the India's MCX gained 5 per cent. In comparison, the benchmark BSE Sensex has accelerated near 12.5 per cent. Earlier this week, the Sensex crossed the 30,000 mark for the first time in history.

Gold is typically considered a hedge to geo-political uncertainty. Over January-March, global uncertainties led to investor holding in gold rising at the quickest pace in a year. Total global holdings of gold-backed exchange traded funds stood at 2,252 tonnes at the end of March, up 5.9 tonnes versus February. 

"Gold saw increased demand as its safe haven appeal rose on the back of an increase in geo-political risk that is US air strikes, elections in France and Germany and ongoing tensions with North Korea," noted Dhaval Kapadia, director, portfolio strategist at Morningstar Investment Adviser.

Post the recent win of the centrist party in the first round of French presidential elections, some of those uncertainties have ebbed. But, Brexit worries and the upcoming mid-term elections called by UK Prime Minister Teresa May, apart from tensions on the Korean peninsula will continue to weigh. 

In India, over the last five years, data indicates return on gold has declined one per cent, while the BSE Sensex is up over 11 per cent. Although, the economic environment in India remains largely stable, prices could rise further tracking global market uncertainties and a pickup in demand estimated in the domestic market.

In 2016, due to the jewellers strike and then the demonetisation, total gold demand in India fell 21 per cent to 675.5 tonnes, according to World Gold Council, but it is expected to revive this year.

"The prospects for a sustained price rally are better than they have been for years as a weaker dollar, falling oil prices and concerns about the global economy have revived its safe haven status," said Prathamesh Mallya, chief analyst at Angel Commodities Broking. 

Kapadia of Morningstar says investors must invest in gold to diversify their portfolio, but the holding should be only around 5-10 per cent of their total investments. Mallya also advises investors to buy gold, but one would be better off accumulating the yellow metal over a period, so that there are advantages of cost averaging.

"Our advise to investors would be to buy gold in a staggered manner rather than concentrate all your purchases at one go. One should take the benefit of value cost averaging to invest in gold," he said.

This browser settings will not support to add bookmarks programmatically. Please press Ctrl+D or change settings to bookmark this page.
Topics : #Gold | #Gold price

Related Reading

    Show more