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Gold gains 8% from last year’s Akshaya Tritiya – These factors to impact prices from now on

Rising interest rates are negative for gold as the cost of holding it rises, besides gold is a non-income generating asset.

Gold price in India, Gold prices gains, factors to impact, inflation, interest rates, hedge, mutual funds, PPF, NPS
Gold prices were range-bound for much of the past year prior to the Russia-Ukraine war.

Akshaya Tritiya 2022 Date: Gold price in India has managed to move above the Rs 50,000 mark after a prolonged period of lying low. Price of ten gram of gold has moved upwards from levels of around Rs 47000 as seen during Akshaya Tritiya 2021 to the current levels of about Rs 51,000. Akshaya Tritiya 2022 falls on May 3, 2022 and the sustainable demand of gold may keep the prices at higher levels.

“Domestic gold prices are up about 8% Y-o-Y as of April 29, 2022. Gold prices were range-bound for much of the past year prior to the Russia-Ukraine war,” says Dhaval Kapadia, Director – Managed Portfolios, Morningstar Investment Adviser India.

Gold Outlook

Several latest developments may continue to impact the gold price at least in the near future. “Gold is likely to find support over the near term supported by geopolitical tensions, the likelihood of a stagflation scenario (low growth and high inflation) and on recovering local demand.

However, this could be overweight by aggressive tightening by major global central banks to tame the persistently high inflation, and a de-escalation in geopolitical concerns could lead to a decline in risk-aversion weighing on gold prices. Further rising interest rates are negative for gold as the cost of holding it rises, besides gold is a non-income generating asset”, says Kapadia.

With soaring inflation in most countries, gold may return to its label of a hedge against inflation. “Inflationary pressure is not expected to come down soon which may lead to underperformance of equity assets and diversion of funds to Gold assets. Thus, Gold which has given about 17% annualised return in the last 3 years is expected to shine further,” says Swapnil Bhaskar, Head of Strategy, Niyo – neo-bank for millennials.

Gold Investors

In addition to equity mutual funds, PPF, NPS and other investments, one should diversify across gold and even real estate. Having a proper asset allocation plan helps in the long run.

“Gold is a long-term asset and investors should not be worried about it in the short run. It is suggested to stay invested and one can make an investment in gold ignoring the market timing when investing for the long term. 5-10% of your portfolio should be dedicated towards gold as it ensures averaging out any losses in the portfolio in the long term, during market falls, acting as a hedging tool,” says Priti Rathi Gupta, Founder, LXME – India’s first financial platform for women.

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