Is buying gold on Akshaya Tritiya a good investment strategy this year? It really seems like yes. Since the last Akshaya Tritiya, the yellow metal gave about 8% return.
But there are concerns. The World Gold Council (WGC) estimated that demand for gold jewelery from India fell 26% on an annual basis in the March quarter to 94 tonnes, after hitting record highs in the previous quarter.
According to Motilal Oswal Financial Services Ltd (MOFSL), the rise in gold prices since the start of 2022 has deterred buyers.
“Since February 2022, gold prices have risen sharply, supported by its safe-haven demand amid heightened risk aversion due to geopolitical tensions, soaring inflation and concerns about the slowdown growth due to supply chain disruptions. The depreciation of the rupiah against the dollar has also boosted domestic prices to some extent,” said Dhaval Kapadia, director, managed portfolios, Morningstar Investment Adviser India.
Ghazal Jain, Associate Fund Manager – Alternative Investments, Quantum AMC, believes that for now, international gold prices will continue to move within a wide range as investors grapple with determining which factor has implications. more important for metal.
“The main factors to consider are sky-high inflation, potential recession and other geopolitical and economic repercussions from the Russian-Ukrainian war or higher yields and a stronger dollar due to US Federal Reserve monetary tightening. “, said Jain.
Experts are also of the view that inflationary pressures are unlikely to ease any time soon. “This can cause equity assets to underperform and funds to be diverted to gold assets. So gold which has given around 17% annualized return over the past three years should still shine,” said Swapnil Bhaskar, Head of Strategy at Niyo.
The precious metal is currently trading at around ₹51,000 level in the domestic market. According to a note from MOFSL, gold prices could be trading in a wide range, with critical support at ₹50,000 followed by ₹48,000 and ₹46,500, while the upside rallies towards ₹ 55,000 would be opportunities to exit long positions.
Agriculture also plays an important role in stimulating the demand for gold. Skymet forecast a normal monsoon this year, which should help agriculture and boost rural demand.
Somasundaram PR, Regional CEO for India at WGC, said economic growth combined with inflationary expectations is poised to support gold buying this festive season, but “price volatility will act like a wind opposite”.
Yet, financial experts suggest having around 5-10% of a portfolio in gold, as it acts as a cushion in times of economic crisis.
“Valuations play an important role when entering any asset class, as lower valuations reduce downside risk and improve upside potential and vice versa. build a gold allocation in a staggered way over time,” Kapadia of Morningstar India said.
Depending on their needs, people can invest in physical gold, digital gold, sovereign gold bonds (SGBs), or gold exchange-traded funds (ETFs).
Niyo’s Bhaskar suggests that SGBs, gold ETFs or mutual funds are a better option because storing physical gold is difficult and there is a trust deficit between buyers and sellers.
“If we look at the last five to eight years, gold has shown a positive growth trend. And as we know, gold is a long-term asset and investors should not worry about it in the short term. It is suggested to stay invested in gold, and one can make an investment ignoring the timing of the market when investing for the long term,” said Priti Rathi Gupta, founder of LXME, a financial platform for women.