Buying gold in festive occasions, especially during Dussehra and Diwali, is considered highly auspicious. Many believe that purchasing gold can usher in good fortune and prosperity for the year ahead. However, as gold prices have surged by nearly 20% over the past year, it's crucial to make informed investment decisions.

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A look at gold prices

Gold prices have been on the rise, influenced by various global factors. On Tuesday, spot gold saw a 0.1% increase, reaching $1,973.69 per ounce, while US gold futures slightly eased to $1,985.10. This increase followed a decline in the yield of the benchmark 10-year US Treasury note, which had briefly crossed the 5.0% threshold, raising concerns of an economic slowdown due to higher borrowing costs, according to news agency Reuters.

Global markets are closely watching upcoming US economic data, particularly the GDP figures for the third quarter and the US PCE price index, to gain insights into the country's economic strength and its potential impact on the Federal Reserve's monetary policies. Higher interest rates increase the opportunity cost of holding gold, which doesn't generate interest.

Geopolitical concerns, particularly the Middle East conflict, have also contributed to increased demand for gold as a safe-haven asset. The SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, reported a 0.4% decrease in its holdings on Monday.

In India, local factors such as robust consumer demand, currency depreciation, and purchases by the Reserve Bank of India (RBI) have driven gold prices upward. Geopolitical tensions in the Middle East and higher inflation have added to the price pressure. In May, gold reached an all-time high of Rs 61,490 per 10 grams, and it currently trades at Rs 60,500 per 10 grams.

The outlook

The future outlook for gold is intriguing, with many global banks and brokerages projecting that gold prices will reach all-time highs between $2,050 and $2,200 per ounce in 2024. Emkay Wealth Management emphasises that gold is considered a safe haven, especially during times of geopolitical uncertainty, and expects gold to trend higher in the immediate term.

Despite a strong dollar, gold's safe haven status has remained significant, given the ongoing Middle East conflict. Gold prices have held firm at the $1,880 per ounce and $1,860 per ounce levels. The combination of persistent inflation across major economies and a hawkish monetary policy has led to gold moving sideways.

On the supply front, the expectation is for a relatively high fresh supply from mines and used gold. Central banks are also expected to continue their gold purchases. Easing monetary policies, projected for mid-2024, are likely to benefit long-term gold investors, as per Emkay Wealth Management.

Investing in gold

According to Saurabh Gadgil, MD of PN Gadgil Jewellers Pvt Ltd, this is a great time for the entire gold industry, with a lot of optimism and investments in gold bullion. The overall enthusiasm in the market has made gold an attractive investment option for the next 2-3 years.

Asher O, Managing Director of Malabar Gold & Diamonds India Operations, points out that the market is very positive, and confidence is high, reflecting strong sales growth year-on-year. People are enthusiastic about buying jewellery, despite the recent gold price hike.

Ashraf Motiwala, MD of A S Motiwala Fine Jewellery, notes that the pandemic has turned gold into an asset class, with consumers shifting towards diamonds from gold. Gold remains a timeless investment, whether in the form of coins or ornaments.

For a significant portion of society, gold symbolises stability during times of uncertainty, serving as a scarce yet highly liquid asset. As the long-term outlook for gold remains positive, analysts think it is a compelling investment in the face of persistent geopolitical tensions and economic fluctuations.

Forms of buying gold

When it comes to buying gold, there are various forms available, each with its own advantages. Buying physical gold carries risks such as storage and purity concerns. Digital gold, including Mutual Funds, Sovereign Gold Bonds (SGB), and Gold Exchange-Traded Funds (ETF), offers a safer and more convenient option.

The choice between these forms depends on individual preferences and investment goals, with ETFs and Gold MFs offering liquidity and SGBs suitable for long-term investors seeking stability and additional returns.

(Edited by : Amrita)

First Published:Oct 24, 2023 9:29 AM IST