Why current downside to gold prices could be a good entry point for gold investors to capitalise?

Gold Investment in India: India is one of the largest gold markets in the world with several tonnes of gold reserve in private hands. 

This is not the new market or which has evolved of late rather Indians, traditionally, believe investing in the gold to limit the risks. It is considered as a hedge to beat inflation. 

Domestic gold prices ended the month only 0.7% lower supported by a depreciating rupee and festive demand on Diwali and Dhanteras, said Quantum Asset Management Company (AMC). Even as international gold prices moved between $1,620 and $1,720 per ounce in October, gold bears outpaced gold bulls, bringing prices down by 2%, and ending the month close to $1,638 per ounce. 

Given that gold registered a seventh consecutive monthly decline in October, current prices can be a good entry point for gold investors to capitalise on the upside in prices from the recession, risk aversion, and end-to-rate hikes that are to eventually follow, Quantum AMC said.

Lower volatility than equity

In addition to the returns it offers, gold has traditionally demonstrated lower volatility than equity investments over the long term, which is a major justification for using it as a hedge. 

Quantum AMC added, "Indicative of the prevailing global uncertainty and need for diversification, global central banks bought a record 399 tons of gold ($20bn) last quarter taking full-year purchases to 673 tons, the highest since 1967. Investors too should acknowledge the risks in the current economic environment and diversify their portfolios with a gold allocation."

Gold investment amid high inflation 

When the Ukraine crisis started, the gold prices spiked. However, they declined later after the February-March high. Sovereign gold bonds outperform other gold investments for this reason. Over and above the rise in metal price, the investor receives an additional 2.5% interest per year.  Sovereign gold bonds are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.

Gold Price India (November 8) 

On Monday, December Gold futures closed with marginal gains at Rs 50,925 per 10 grams — a rise of Rs 59 or 0.12 per cent from the Friday closing price. Meanwhile, December Silver futures settled at Rs 60,855 per kg, up by Rs 317 or 0.52 per cent.

In the absence of major local triggers, bullion is unlikely to see big movement, commodity and currency expert Anuj Gupta said.  However, the bias is expected to remain positive over the trading session amid relatively weaker Dollar Index (DXY) coupled with a strong local demand, Gupta added. The US Dollar is off from highs of previous weeks and the Dollar Index is currently hovering around 110, down from the highs of 115 against the basket of major currencies. 

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