Gold continues to glitter: What is the expectation on investment returns in 2024?

LONG BEFORE stocks, mutual funds and other financial instrumentsbecame part of the broader mix of investment options, gold has a preferred choice for parking wealth in India. The yellow metal is considered a safe haven asset, which provides a hedge against inflation or any kind of financial uncertainties. Apart from buying physical gold, the other options to investing old include instruments such as Sovereign Gold Bonds (SGBS), digital gold and gold exchange traded funds (ETF).

Why has gold been a preferred investment?

Gold has been an attractive investment asset for investors across the globe, including India, due to its outstanding return of more than 50 percent compound annual growth rate (CAGR) in the domestic market over the last two-and-a-half years, said d eve ya Gaglani, Senior Research Analyst - Commodities, Axis Securities. It is universal ly recognized as one of the best investments to preserve value, capital, as well as purchasing power.

According to World Gold Council, Regional CEO, India, Sachin Jain, gold is at the centre of celebration son auspicious occasions in India and consumers celebrate au spic io u soc cass ions such as Akshaya Tritiya by purchasing gold, besides buying the yellow metal for marriages and family events in the form of gold coins, bars, jewellery and ticket purchases through digital gold buying platforms.

“Indian households have a strong cultural affinity for gold, and the appreciation in prices has further strengthened the demand for golda san investment asset, resulting in increased consumer interest in Gold ETFS. Given the strong cultural connect, any short term softening of gold prices could see record gold demand this Akshaya Tritiya,” Jain added.

How much have gold prices surged?

Gold prices recently reached historic levels of rs 70,000 in india, mainly due to geopolitical tension sand central banks' accumulation of gold reserves, which have outweighed the hawkish stance adopted by us federal reserve officials this year, Axis Securities’ Galani said.

Gold prices have witnessed a sharp rally in the month of March 2024, with prices hitting all-time high sin domestic and internationalmarkets. gold prices in india have crossed Rs 73,000 per 10 gram while at com ex prices have crossed $2400 per ounce mark, said Tapan Pa tel, Fund Manager commodities, Tata Asset Management.

What is the outlook on gold prices?

Gold prices may continue to get support from global macro headwinds,centralbanks’buying and geopolitical factors. The US Fedpivotofinterestratecyclemay provide a sudden boost to the prices where market is still bracingfor‘higher-for-longer’ratescenario, said Tata Asset Management’spatel.accordingto Geojit Financial Services’ Head of Commodities Hareesh V, “Since domesticgoldpricesarehovering near record highs, there is a chanceofatechnicalcorrectionin gold price in the immediate run.” But in the long run, firm overseas prices, increased physical demand, and a weak rupee would assist prices to retain their bullish outlook, he said.

What is the expectation on gold investment returns?

“We believe this year itself we are going to witness a slowdown in the returns generated by gold, compared to the last two years.

This conjecture is based on several factors, one of the key ones being the strengthening of the US dollar riding on the back of an expected relaxation of interest rates by the Fed later this year,” said Shashank Pal, Chief Business Officer, PL Wealth Management.

In addition, Central Banks of the world are currently on a buying spree. Such a spree will definitely ta per down within the next one or two quarters, thus markedly lowering demand, Pal added.

What should investors do? gold is one of the best long-term assets which offers both safety and decentits investors. domestic gold has more than doubled in the last 5 years, and it gained 10 times since2003. so, investors can make use of every price correction to add the metal into their portfolio for long-term benefits, Geojit Financial Services’ Hareesh said.

Analysts recommend buying gold in smaller denominations rather than making large purchases.

Investors should consider factors such as market trends which are a bit volatile, geopolitical events on West Asia crisis and delay in interest rate cuts by the US Federal Reserve, and their own financial goals before investing in gold during Akha Teej or Akshaya Tritiya said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.