We have seen a robust jump in gold imports during the past, as consumers splurged on Akshaya Tritiya, as it is considered to be an auspicious day to buy gold jewelry.
As the festival Akshaya Tritiya draws near, the most auspicious day to purchase gold according to the Hindu tradition, gold prices are trading close to all-time highs. While gold disappointed investors in 2022, a slew of concurrent global factors gave rise to the yellow metal’s prices across the world so far this year. Ravindra V Rao, CMT, EPAT, VP-Head Commodity Research, Kotak Securities, tells Zoya Springwala of FinancialExpress.com if this Akshaya Tritiya is the right time to invest in the metal or merely purchase a token amount!
With the current prices above Rs 60,000/10 grams, what do you expect the demand for gold to be on Akshaya Tritiya?
International gold prices have been rallying since late 2022, owing to prospects of Fed pivot, weakness in the dollar and rising geo-political tensions. Domestic gold prices rallied almost 10% so far in 2023 and are hovering near record highs. Akshaya Tritiya is considered to be an auspicious day to buy gold jewelry and is a sign of good luck and an invitation to prosperity into the household. We have seen a robust jump in gold imports during the past, as consumers splurged on Akshaya Tritiya, except for the Covid hit 2020 and 2021. But the scenario is a bit different this time. With record high prices, jewelry demand might ease a bit, however, investment demand is expected to rise sharply, given the current trajectory of the global economy.
What is your outlook for gold in the near-term?
The recent pullback in domestic gold prices, after touching record highs, have been due to a significant jump in US inflation expectations during April. US consumer price inflation rose 0.1% month-on-month in March, but core CPI continues to run hot, rising 0.4% month on month. Persistent core inflation and better than expected results from several of the biggest banks in the US, eased some of the contagion fears and cemented expectations for another quarter point rate hike in May FOMC meeting. Money markets are pricing in only two 25 basis point rate cuts this year, compared with 100 bps cuts seen in March. Investors are still waiting for clear indications that a recession is coming. Amid rising rates, we might see some corrective moves in gold prices for the near term.
Is this Akshaya Tritiya the right time to buy gold in significant quantities or should investors buy a token amount and wait for a correction to purchase more later?
Though the near term outlook remains clouded with May FOMC meeting in focus, the medium to long term outlook remains bullish. We believe one should not time the market and should stay invested in gold in a staggered/systematic manner. Despite the highest inflation in decades, prospects of a looming recession and heightened geo-political tensions, gold’s performance in 2022 has disappointed many investors. The major reason for lackluster performance was due to a stronger dollar index. However, we believe that decline in the greenback is going to be the major trigger for the gold price rally in 2023. Gold is also going to be a beneficiary of the rapid pace of de-dollarization. With a deteriorating economic outlook, rising China-Taiwan tensions and Fed rate cuts in focus for 2H 2023, the yellow metal is the best investment option at this point of time.
Source:financialexpress.com