As gold prices soar, instead of going for a full-fledged purchase, some experts suggested that it would be a more viable option to purchase a token amount this Akshaya Tritiya.
The demand for gold this Akshaya Tritiya might be subdued as gold prices have surged drastically across the globe. On the MCX, the yellow metal is trading at Rs 60,230 per ten grams. Gold prices have rallied over 12% this year, and the high prices might lead to investors postponing their purchases.
Gold price trajectory and impact on Akshaya Tritiya
In January, when prices were around the Rs 54,000 mark per ten grams, retail demand for the precious metal was tepid, added Praveen Singh, AVP, Fundamental Currencies and Commodities Analyst, Sharekhan by BNP Paribas. “We anticipate that gold jewellery sales during this year’s Akshaya Tritiya on 22 April will remain subdued due to gold prices rallying more than 12% this year,” said Deveya Gaglani, Research Analyst – Commodities, Axis Securities.
“The demand sentiment can be gauged by the discount being offered by the wholesale market to the tune of nearly $3 per ounce as supply is strong but demand is expected to be weak,” said Bhavik Patel, Commodity and Currency Analyst, Tradebulls Securities.
Is this Akshaya Tritiya the right time to buy gold?
Gold should be down by Rs 2,000 per ten grams on the MCX, before investors look at purchasing large sums of the metal, according to Bhavik Patel. However, for those who are determined to add gold to their portfolio, Deveya Gaglani suggested that investors should stagger their purchases and spread it out over various tranches, which would mitigate the risk of buying at a peak.
Conventional norms suggest that gold is a safe-haven commodity, and it should be used to hedge investors’ bets against rising inflation. Praveen Singh said that this Akshaya Tritiya might be the right time to add gold to portfolios and ideally, 5-15% of an investor’s allocation should be dedicated to gold. Heightened geopolitical uncertainties, banking crises and economic concerns, such as a hard-landing from the US Fed’s rate hike cycle, might drive spot gold prices up to $2,500 per troy ounce in the medium term, he added, suggesting that investors should look for corrections and dips to buy additional gold.
Are gold ETFs a good option for Akshaya Tritiya?
Alternatively, Chintan Haria, Head – Investment Strategy, ICICI Prudential AMC, suggested that gold ETFs might be an option that investors should consider if they’re looking to purchase gold on Akshaya Tritiya. Since ETFs are convenient mechanisms and offer higher liquidity, it is an ideal way to diversify. He added, “An investor can consider allocating up to 10% of the portfolio towards Gold ETFs.”
“We could see gold accumulation and small ticket purchases through digital gold buying platforms see faster growth, reinforcing the urgent need for a regulatory framework for these. Recent tax changes have put gold funds at a tax disadvantage which could offer an unintended advantage to digital gold buying. However, given the strong cultural connect, any short-term softening of price could mean a Akshaya Tritiya surprise for jewellery demand,” added Somasundaram PR, Regional CEO, India, World Gold Council.
Outlook for gold prices
While gold prices might outperform in the long-term, in the near-term, experts predicted that gold prices might see some correction, especially since the metal is in an overbought zone. “Gold is expected to decline to $1,900-$1,950, which would take the prices down by 3% to 5% lower from the current price of around $2,000/ounce,” said Praveen Singh. The decline in the price of gold is prompted by recent global developments, which resulted in a more cautious stance. “The rapid rise in gold prices seems to be slowing down after the Federal Reserve announced its intention to continue raising interest rates, dampening investor sentiment toward precious metals. In addition, the U.S. dollar index has climbed above $102, and the 10-year U.S. Treasury yield has risen by over 4%, both of which can impact gold prices,” said Deveya Gaglani.
Source:financialexpress.com