Gold’s 30% returns since last Dhanteras outperforms most asset classes. What lies in Samvat 2081?

Dhanteras is synonymous with gold buying and people who purchased yellow metal on this day (November 10, 2023) last year have been rewarded handsomely with 30% returns in less than a year. Despite the surge, there is still an upside to Rs 87,000 per 10 gram till next Dhanteras which is a 10-11% gain over current levels.

So far in this year, gold has surged by 24% while its CAGR returns over the last five years stand at 15%.

Likewise its bullion peer silver has delivered even better returns of 35% in this period.

This time Dhanteras will be celebrated on Tuesday.

Gold and silver have outperformed all other asset classes and the outlook remains bright on multiple levers including the likelihood of a dovish monetary policy by global central banks, weakness in dollar index and geopolitical concerns.

“Gold has surged more than 24% so far this year, hitting successive all-time highs, tracking a bullish trend in the overseas market. Both precious metals have outperformed all other asset classes this year making it an extraordinary year for them,” Anuj Gupta, Head Commodity & Currency at HDFC Securities. “We expect that investing in gold will reap benefits in the future and it will provide attractive returns notwithstanding the rally in the past one year. Geopolitical and economic uncertainties, significant global ETF inflows, dovish monetary policy by western central bankers, the US election, and a lower dollar index continue will support the bullish trend in gold,” Gupta said.Gupta recommends a ‘Buy’ on gold around Rs 75,500–76,000 with further accumulation on dips in the range of Rs 73,500–73,700 range for the price target of Rs 85,300–87,000 till next Dhanteras. He places the stop loss at Rs 71,500.

Expert Prathamesh Mallya, DVP- Research, Non-Agri Commodities and Currencies at Angel One calls gold a “portfolio diversifier for investors, going on to say that it could be a substitute for equities in the near to medium term for less risk appetite investors. Geo-political problems and US elections are strong triggers to keep gold’s haven appeal up, he added.

As for silver, its haven appeal and industrial utility makes it a prized commodity.

Gupta said that the silver too looks bullish as a stable supply and growing demand have led to an upward trend in silver prices. The outlook remains strong in the long run as the market expects a fourth consecutive year of structural deficits in 2024 due to the massive outstripping of silver demand over supply.

“The MCX silver is set for more gains, with it possibly approaching the 1,06,000 and the next target is 1,09,950 levels. Buy silver mini near-month futures around Rs 95,000-95,500, add on the dip around 92,000-92,500 for the upside objective of 1,03,500/1,06,000/1,09,950, and keep your stop loss at 88,000,” the HDFC Securities expert said.

While the long term prospects of gold remain intact, investors with a short-term view must remain wary as experts see prices to subside on account of getting overheated.

“We expect gold prices to subside over the next few months before resuming their long term bull run as it is extremely overheated as an asset class,” Amit Goel, Co-founder and Chief Global Strategist at Pace 360 said. He sees no material impact of Diwali with regards to the movement in domestic yellow metal prices.

In the last seven years till 2023, gold has remained subdued in one month prior to Diwali. Its returns have been 0.2% in 2017, 1.4% in 2019 and 0.7% in 2020 while falling by 0.2% in 2018. In 2021, 2022 and 2023, its returns have been to the tune of 3% on each of the three occasions.

“Gold has historically experienced sharp volatility in the pre-Diwali period. However, much of this is not because of Diwali but because of global macro factors. Over the last 10 years the average return in the one month to Diwali has been only mildly positive. Most of that positive return is because of the last 3 years when gold moved up smartly in the run-up to Diwali,” Goel informed.

However, gold’s festive appeal along with the wedding season ahead could lead to a surge in demand for physical gold irrespective of where the prices are, the Pace 360 expert said.

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