Gold rush to continue as experts expect prices to touch ₹70k/10g, staggered investment advised

• Gold prices might see volatility in the short term based on changing expectations of the US Fed’s interest rate cuts.
• Its long-term appeal as a safe haven asset remains unchanged due to rising geopolitical uncertainty.
• Investors must make staggered investments into gold at these current prices, advise experts.
  

The world is seeing ‘the great gold rush’! The yellow metal hit another new life high last week. Even as its prices hover around ₹67,000 per 10g — trading close to lifetime highs — analysts are not worried. They say that there is still juice left in the bullion to provide good returns for long-term investors.

“We have a bullish outlook in gold for the calendar year 2024, we expect gold might touch $2,280 & $2,350 in the international market, in rupee also it might touch around ₹68,500 to ₹70,000,” says Rahul Kalantri VP of commodities at Mehta Equities.

Last week, gold prices rallied by 4%, aided by a fall in the US dollar and bond yields. Its sharp surge was unexpected and out of fist for many experts, and it could fluctuate in the near term based on changing the US Fed’s interest rate cut expectations. Yet, few doubt its long-term appeal.

“While there will be fluctuation in the short term, gold has given solid returns for long-term investors. Due to the geopolitical situation and sentiment in the global economy, it will see good demand. Besides, there is no trigger that will put negative pressure on gold,” Hareesh V, head of commodities at Geojit Financial Services tells Business Insider India.

Central banks, hedge funds & more

As many economies across the world face negative GDP growth, slowdown and more uncertainty, gold’s appeal as a safe haven asset has been growing. Central banks across the world bought a record 1081.9 tonnes in 2022 and 1037.4 tonnes in 2023, as per the World Gold Council. Many classes of investors are betting on it.

“Hedge funds also increased their long bet on gold at record levels. Record $11.3 billion flowed in the gold market after it broke its major resistance of $2,050 per troy ounce in the international markets,” said Rahul Kalantri.

As per the Commodity Futures Trading Commission data, net long positions increased to 1,09,763 contracts, a whopping jump of 95% from last week. This indicates that they are betting on its long-term value creation.

“The global gold exchange-traded funds (ETF) inflows which are negative so far, may contribute to large inflows into gold in coming months. In addition, geopolitical factors may keep risk premium higher in gold prices over the long term,” says Tapan Patel, fund manager – commodities, Tata Asset Management.

How should investors look at gold?

Investors, however, must be ready to see volatility in the short term, caution experts. A relentless rally in any commodity entails several risks, at least in the short term.

“The global market is uncertain about the time and quantum of the rate cuts from the US Federal Reserve. The long-term price volatility may ease gradually once the US Fed starts the first pivot of the current rate cycle which will support gold prices to rally further as we have seen historically,” explains Tapan Patel.

Experts advise investors to make staggered investments in the commodity. “One can invest in gold on a systematic basis, in small grammage preferably. Because in the long-term it’s a solid asset. It has almost doubled in the last five years,” says Hareesh.

Agrees Patel, “Investors may increase gold exposure at least 8-10% of the portfolio in a staggered manner from the current price levels ahead of market uncertainty and high volatility. Gold provides value protection to the portfolio during market uncertainty.”