As the Indian rupee displays signs of weakening against the dollar and the festive season approaches, many investors are wondering if it’s the right time to invest in gold. Gold has long been considered a safe haven asset, offering diversification to investment portfolios, reducing volatility, and potentially enhancing returns. Financial experts often recommend allocating a portion of one’s portfolio to gold, especially as it can help mitigate losses during downtrends in equities. With the current economic landscape, including the rupee’s vulnerability and the upcoming festive season in India, there’s a growing consensus that this could be a favorable time to capitalize on the positive trend in gold.
Jateen Trivedi, Vice-President of Research at LKP Securities, suggests that the robust festive demand in India could contribute to maintaining stable gold prices. For investors looking to enter the gold market, he suggests a strategic entry point between the current price levels of Rs 58,500 and Rs 57,000 per 10 grams.
The recent fluctuations in the value of the rupee against the dollar are influencing the price of gold in India. The rupee, which recently hit an all-time low against the dollar, has a direct impact on gold prices, as a weaker rupee tends to increase the cost of gold in local currency terms.
Trivedi also points out the global trend of central banks acquiring gold and the uncertain global economic landscape. These factors could contribute to the steady or even rising nature of gold prices. However, he notes that any shift in the US Federal Reserve’s interest rate policy could quickly change this trajectory. If the US Federal Reserve suggests a pause in rate hikes or even a potential interest rate cut, gold prices could see a surge.
Considering these factors, investors might find reason to be optimistic about gold’s outlook. Trivedi predicts potential price levels ranging from Rs 61,000 to Rs 62,000 per 10 grams by the end of the year. This projection aligns with both the weakened rupee and the traditional upswing in demand during India’s festive season.
The past five years have demonstrated gold’s outperformance compared to the Sensex, the benchmark stock market index in India. While gold has surged by 99 percent since July 2018, the Sensex has risen by only 77 percent during the same period. The rupee, on the other hand, has depreciated by 31 percent against the dollar.
Experts attribute gold’s impressive performance to various factors, including weak economic prospects, supply chain disruptions caused by the pandemic, geopolitical tensions, central banks’ gold reserve acquisitions, and uncertainties surrounding the dollar.
In conclusion, considering the ongoing market uncertainties and economic indicators, many experts advise investors to consider allocating around 20 percent of their investment portfolios to gold. This strategy aligns with the current economic environment and the potential benefits that gold can offer as a safe and potentially profitable investment during times of volatility.
