Buying gold is considered auspicious during the Dhanteras and Diwali period. The price of spot gold (24 karat) is around Rs 38,925 per 10 gm on Tuesday October 22nd,  compared to Rs 32,300 on 29 December 2018, making gold one of the best investments of the year. The price of gold rose by Rs 6,625 per 10 gm generating whopping 20.51% returns, breaching the gains given by benchmark indices Sensex and Nifty in the same period. Meanwhile, looking at this continuous trend of gold prices in the recent past, the investors must be in deep confusion if it is the right time to invest in gold in this period between Dhanteras and Diwali.

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Notably, gold prices have corrected from last month's record high of about Rs 40,000 per 10 gm. However, some experts believe that gold demand may witness a dent in demand this festival season, hurting rates further. However, 2019 has proved to be one of the best years for Gold returns as prices have risen by 15% on domestic front, getting some support from weakness in the rupee that has fallen by 1.4% against the US dollar. Since last Diwali gold has outperformed across major asset classes and this year return has been to the tune of 21%, with equities giving a return of 10%.

Gold prices have showed strong signs from the beginning of this year following a lot of distress related to trade war between US and China, geopolitical tension and Brexit related uncertainty. A lot of these factors led institutions like IMF, OECD and World Bank to trim their global growth forecast not only for this year, but for the coming year as well. Central banks across the globe also turned dovish since the start of the year adding further gains for gold.

Kishore Narne, Head- Commodities & Currency, Motilal Oswal Financial Services has this outlook for the yellow metal: ''We expect that positive momentum for gold could continue further, but the pace of rally could get measured as uncertainties related to trade war is taking back seat. Brexit related uncertainty could take a pause as the deadline could be extended to January 2020. But we are of the view that this slowdown in major economies could push central banks to remain dovish for an extended period and that could continue to support gold prices.''

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The domestic Gold demand has remained subdued for previous festivals, where Dussehra sales were 20% lower than previous year and at the same time higher prices could dent the overall demand in Diwali as well. Elevated prices and hike in import duty by 2.5% also took a hit on gold imports that were down 12% in 2019. Gold imports for 2019 have been to the tune of ~565 tonnes until September compared to ~644 tonnes in the same period last year.

''The elevated prices will remain a point of concern, but with a fair monsoon and festive season approaching it will be important to see the movement in domestic gold prices. India has also added gold to its reserves and with a dovish outlook on the economy,  gold could continue to outperform. We expect that ease off in trade war could lead to some correction in prices, but until Rs 35,500 is held, we remain bullish and expect it move higher to test previous highs of Rs 39,500 followed by Rs 41,500 over the next 12 months,'' Narne added.

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