Should I invest in gold looking at current market conditions, geopolitical tensions? What are your expectations for 2024 at least? Name withheld.
Reply by Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited
Given the current global economic climate, Investing in gold can be a strategic move. With rising inflation and economic uncertainties, gold serves as a safe-haven asset that can help protect against market volatility and currency depreciation.
Additionally, the recent reduction in import duties in India has made gold more affordable, potentially boosting demand and leading to favourable returns.
However, gold prices can be influenced by interest rates, geopolitical tensions, and the strength of the US dollar. If you are considering gold as a long-term investment or a hedge against inflation, this could be a good time to buy. As always, it's important to assess your financial goals and risk tolerance before making investment decisions.
Gold, a precious metal long revered for its status as a safe haven asset, appears set to become an attractive investment option in light of the upcoming festivals in India and amidst ongoing global uncertainties. Market participants are looking ahead to the potential interest rate cut by the US Federal Reserve in its September monetary policy meeting, and similar actions are expected from central banks globally, including the Reserve Bank of India (RBI).
As major central banks contemplate adjusting interest rates against a backdrop of economic slowdown, the appeal of gold as a hedge against inflation and currency volatility has only been accentuated.
Gold so far in 2024
Gold is a universally recognised precious metal that is easily traded in various forms, including coins, bars, and jewelry. Additionally, there are investment tools like the SPDR Gold Shares (GLD) that allow investors to engage in gold trading without physically owning the metal.
In an investment portfolio, gold can function as a strategic asset due to its low correlation with other asset classes, such as stocks and bonds. The World Gold Council notes that gold's price movements often correlate with the stock market during "risk-on" periods, while showing no correlation during times of market stress.
It's important to consider that correlations between assets can fluctuate over time, and the insights provided by the World Gold Council are based on data up to September 2024.
The price of gold has experienced significant growth in the calendar year 2024. Starting at $2,063.73 per ounce on January 1, 2024, it has increased to around $2,490.70 per ounce as of September 4. This represents a more than 20% rise in less than a year. While the current price is lower than the recent peak, some experts believe that gold has the potential to reach $3,000 per ounce or even higher in the near future.
Gold demand is known to remain consistently high, allowing for ease of both buying and selling transactions. With the current price of gold higher and the possibility of it increasing further in the upcoming months, selling at this moment might be advantageous. Moreover, purchasing gold in large quantities could potentially lead to receiving a discounted price, facilitating the opportunity to sell it at a premium later.