Not just safe haven, gold best performing asset class of 2022

Beating both equities and bonds, gold has turned out to be the best performing asset class so far in the calendar year 2022. From Jan-August 2022, MCX Gold gave a return of 5.5 per cent, while midcaps gave a return of 3.4 per cent, Nifty 2.3 per cent and the bond index 1.1 per cent.

Gold was also the top performer in pandemic-hit 2020 as it delivered a return of 28 per cent as investors rushed for safe assets. Last year, however, the metal gave a negative return of 4 per cent while smallcaps and midcaps gained 59 per cent and 46 per cent, respectively.

“As an asset class, gold has been the beneficiary of high volatility in the equity market since 24th Feb’22, driven by the prevailing geopolitical crisis, rising inflationary expectations, the rising oil and commodity prices. All these macro developments are limiting the performance of equity as an asset class,” Axis Securities said in a report.

A clear direction, however, is likely to emerge only after the volatility settles at lower levels for a longer time. “Until then, gold will continue to find an edge over the other asset classes. It will be treated as an instrument facilitating flight for safety as the slowdown risk mounts over the US market due to aggressive rate hike expectations,” it said.

Analysts say that based on the current macroeconomic development, the safe haven metal will continue to be a preferred asset class until uncertainties over the Russia-Ukraine fade and will continue to attract investments as a proven hedge against other asset classes.

Time to buy gold?

Gold prices have been in a consolidation phase since May in the domestic market and are seen finding support at Rs 49,500 per 10 gm mark, while the upside is restricted to around Rs 52,700 mark.

“A short unwinding and a buying interest near the long-standing support of $1,680 per ounce could underpin prices on lower levels. Also, considering the upcoming seasonal demand season, we feel that it would be a buy-on-dips strategy that traders can adopt,” Sugandha Sachdeva, Vice President, Commodity and Currency Research,

Broking, said.

Axis Securities, which has a neutral stance on gold and overweight stance on equity, said low yields are the driving force behind the gold rally. “With the central banks keeping the interest rates lower, it will continue to attract investments,” it said.

Gold is also seen as one of the best anti-inflation assets.

“Given the economic uncertainties, gold might see an uptick, but the gains may be capped given the central banks around the world are projected to raise interest rates,” Prathamesh Mallya of Angel One said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)