Gold price slips below Rs 52,000: Is this the right time to invest in gold?

While the sentiment seems positive for a lucrative upside in the medium term, there are various factors to consider.

Gold price slips below 52000

Gold prices are highly sensitive to global economic and political changes. The recent volatility brought on by rising inflation, weak global cues owing to the Russia-Ukraine conflict, and steep interest rate hikes in the US has buoyed interest in the demand for the precious metal.

Over the last nine months, the spot rate for 24 karat gold has swung from a low of Rs 47,260 for 10 grams as of September 2021 to a high of Rs 55,250 in March 2022. At present, the gold market price is hovering around Rs 52,000, a 10% premium over the nine-month low, yet shy of the high of Rs 56,200 it touched during the peak of the pandemic in August 2020.

So, is it a good time to buy gold? While the sentiment seems optimistic for a lucrative upside in the medium term, there are various factors that could steer gold price in either direction. 

Also Read: Can Bitcoin Replace Gold As The New Safe Investment Haven?

Factors that could affect gold prices

  1. Russia-Ukraine conflict: With no resolution in sight, the conflict continues to drive ‘safe-haven’ demand for gold. The build-up of NATO forces in Poland is the latest in the series of issues fanning the flame. The gold market will respond sharply to any new developments affecting the EU nations.
  2. US dollar: The gold rate and US Dollar have an inverse relation. When one asset goes up, the other goes down. In recent times, the USD index future has been trading at an all-time high of 104.145, but rising inflation and decreasing US Treasury yields could weaken the dollar and make gold more attractive.
  3. Monsoon: The quantum of rainfall has a direct correlation with gold growth rate, considering that rural India accounts for two-thirds of the domestic gold demand. A healthy monsoon ensures a bountiful crop, driving consumption demand. Other factors such as festivals and the wedding season too are slated to drive demand for gold ornaments.

Also Read: Have Idle Gold At Home? Put Them To Use With These Digital Gold Schemes

What should your investment strategy be?

In the short term, gold is prone to a lot of volatility and may not offer any substantial returns unless you are actively trading through commodity markets, which undoubtedly carry high risk. For immediate physical requirements, always check what is gold rate today and buy only hallmarked gold from reputed jewellers in the city.

From a medium-term investment perspective, the amount of gold you hold should not exceed 5%-10% of your total portfolio. The best way to add gold to your portfolio is via gold ETFs and mutual fund SIPs or through a staggered approach whenever the price dips.

Also Read: 7 Benefits Of Investing In Gold ETFs

If you are considering gold investment for a long-term use case such as your child’s marriage, Sovereign Gold Bonds (SGBs) are a good option that will give an annual interest of 2.5%, in addition to ensuring capital appreciation. 

Gold prices are highly sensitive to global economic and political changes. The recent volatility brought on by rising inflation, weak global cues owing to the Russia-Ukraine conflict, and steep interest rate hikes in the US has buoyed interest in the demand for the precious metal.

Over the last nine months, the spot rate for 24 karat gold has swung from a low of Rs 47,260 for 10 grams as of September 2021 to a high of Rs 55,250 in March 2022. At present, the gold market price is hovering around Rs 52,000, a 10% premium over the nine-month low, yet shy of the high of Rs 56,200 it touched during the peak of the pandemic in August 2020.

So, is it a good time to buy gold? While the sentiment seems optimistic for a lucrative upside in the medium term, there are various factors that could steer gold price in either direction. 

Also Read: Can Bitcoin Replace Gold As The New Safe Investment Haven?

Factors that could affect gold prices

  1. Russia-Ukraine conflict: With no resolution in sight, the conflict continues to drive ‘safe-haven’ demand for gold. The build-up of NATO forces in Poland is the latest in the series of issues fanning the flame. The gold market will respond sharply to any new developments affecting the EU nations.
  2. US dollar: The gold rate and US Dollar have an inverse relation. When one asset goes up, the other goes down. In recent times, the USD index future has been trading at an all-time high of 104.145, but rising inflation and decreasing US Treasury yields could weaken the dollar and make gold more attractive.
  3. Monsoon: The quantum of rainfall has a direct correlation with gold growth rate, considering that rural India accounts for two-thirds of the domestic gold demand. A healthy monsoon ensures a bountiful crop, driving consumption demand. Other factors such as festivals and the wedding season too are slated to drive demand for gold ornaments.

Also Read: Have Idle Gold At Home? Put Them To Use With These Digital Gold Schemes

What should your investment strategy be?

In the short term, gold is prone to a lot of volatility and may not offer any substantial returns unless you are actively trading through commodity markets, which undoubtedly carry high risk. For immediate physical requirements, always check what is gold rate today and buy only hallmarked gold from reputed jewellers in the city.

From a medium-term investment perspective, the amount of gold you hold should not exceed 5%-10% of your total portfolio. The best way to add gold to your portfolio is via gold ETFs and mutual fund SIPs or through a staggered approach whenever the price dips.

Also Read: 7 Benefits Of Investing In Gold ETFs

If you are considering gold investment for a long-term use case such as your child’s marriage, Sovereign Gold Bonds (SGBs) are a good option that will give an annual interest of 2.5%, in addition to ensuring capital appreciation. 

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