Strong demand has fuelled a rally in gold prices. Here's what analysts say on the road ahead

Gold prices topped a new peak of Rs 74,000 per ten gram in April


This Friday, May 10, many Indians will flock to jewellery showrooms on the occasion of Akshaya Tritiya. It is a day when people buy precious metals like gold and silver in the belief that it brings prosperity and good luck.

As such gold has found a place among Indian households for generations, whether it’s buying gold jewellery for weddings or festivals, gifting for special occasions or simply buying gold in the form of coins and biscuits as investment. 

Gold for long has been considered a safe haven asset. When the world is going through uncertain times, the yellow metal shines bright. 

Last month, global gold prices hit a record $2,300 an ounce. In India, gold prices topped a new peak of Rs 74,000 per ten gram in April, before easing a bit in the last few weeks.

So far in calendar year 2024, gold has gained over 13 per cent. In comparison, the BSE Sensex is up just about 2 per cent. 

Gold prices have risen on the back of strong demand. According to World Gold Council, total global gold demand was 3 per cent up in the January-March quarter at 1,238 tonnes, making it the strongest first quarter since 2016. 

Geo-political tensions are another reason behind the rising gold demand. Tensions in West Asia have been high in the backdrop of the conflict between Israel and Hamas. At the same time, the war between Russia and Ukraine continues. 

Another driver has been the continued buying of gold by global central banks. According to the World Gold Council (WGC), the central banks added 290 tonnes to official global holdings in the January-March quarter. The Reserve Bank of India has added 18.5 tonnes to its reserves since the beginning of 2024, taking its reserves to an all-time high of 822.1 tonne, according to the WGC.

Expectations that the Federal Reserve and other major central banks will start cutting rates this year have also driven some towards gold. 

Since India is a big importer of gold, a depreciation in rupee against the dollar also leads to prices going up. 

Hareesh V., head of commodities at Geojit Financial Services says domestic gold price has more than doubled in the last 5 years, and it gained 10 times since 2003.

But one also must remember that gold also goes through periods of stagnation. For instance in December 2012, gold price per ten gram was around Rs 30,000-31,000. Six years later in December 2018, it was still at that level. But, the next year in 2019, prices jumped to Rs 39,000. 

Will gold prices rise further? Hareesh says that while there is a chance of a technical correction in the immediate term, given that prices are still closer to their record high, in the long run, firm overseas prices, increased physical demand, and a weak rupee would assist prices to retain their bullish outlook. 

Mahendra Luniya, the chairman of Vighnaharta Gold believes gold will touch Rs 78,000 per ten gram by the year end.

Analysts typically recommend that 5-15 per cent of one's investment should be in gold. But if you are thinking to go and buy physical gold, do note that costs are high; jewellery, for instance, involves additional making charges. You will also have to store it safely, perhaps in a bank locker, which will also mean additional charges.

"While gold jewellery has cultural significance and has a store value, it is essential to weigh the pros and cons before buying gold. Though gold is considered a good investment against inflation and provides immediate liquidity, it does not provide consistent returns like stock or bonds and also has costs associated with storage. Buying gold ornaments may not be advisable as investments considering the additional cost of making ornaments. Instead, gold bullion coins can be purchased," said Krishnan R., director and CEO, Unimoni Financial Services. 

In recent years, buying digital gold has gained lot of traction. There are several platforms where you can buy 24 carat hallmarked gold online and many platforms allow buying gold for small amounts; some allowing as low as Re 1. This digital gold is certified and stored in insured bank grade vaults by the seller on behalf of the buyer. You could also invest in gold funds or gold ETFs (exchange traded funds).

Luniya of Vighnaharta says the best way to invest in gold is through the sovereign gold bonds. These bonds are backed by the government and therefore extremely safe. Importantly, investors get a fixed interest rate of 2.5 per cent per annum on sovereign gold bonds till their maturity. This will be in addition to whatever price appreciation that happens over a period of time. 

"Also, should you need the funds, you can also sell the SGBs in the capital market before its maturity," pointed Luniya.


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