Amid ongoing military conflict between Iran and Israel, financial markets globally have caught in a turmoil. Over the weekend, Iran launched a massive attack on Israel using hundreds of drones and missiles in what it called a response to a strike on its consulate in Syria. The geopolitical tensions in the Middle East have created jitters among investors who are now looking to stay away from riskier assets and taking refuge in gold due to its safe-haven appeal.
On Monday, the Indian stock market tanked over 1% at open with benchmarks Sensex and Nifty plunging over 900 points and over 250 points, respectively, after military tensions in West Asia sent ripples across financial markets. Cautious investors indulged in sell-offs across sectors in the Indian equity space, helping the gold strengthen its position. Due to its safe-haven status, the precious metal has attracted investors in the wake of the Iran-Israel war.
Also Read: Iran-Israel War: How this will hurt your investment portfolio
Gold prices near Rs 75K level
Gold (24-karat) was trading near the key 75,000-level per 10 grams on Monday. Gold price has surged by nearly 30% in the last 6 months and over 13% this year, outperforming equity benchmarks Sensex and Nifty by a fair margin. Market experts expect gold to rally further keeping in view the current geopolitical situation.
Speaking on the gold price dynamics due to geopolitical tension, Colin Shah, MD, Kama Jewelry, said, “Primarily, the untamed and volatile price trend of the yellow metal breaching new highs, in the backdrop of the recent Iran-Israel conflict has led to investors withdrawing from riskier avenues and reinvesting in gold.”
Given the scenario of looming escalations between the countries in conflict and the response by G7, the price dynamics of gold will continue to be volatile and highly unpredictable, both internationally and domestically, he added.
Gold price in international market
Gold prices initially traded higher in the early morning session driven by safe-haven buying amid escalating tensions between Iran and Israel. Comex Gold surged to $2360, while MCX Gold saw gains of Rs 250.
“However, prices later retreated due to profit booking, especially considering the substantial gains of over Rs 4000 in MCX during the month of April alone, said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
Despite this, the overall trend in gold remains positive, with strong support seen around the Rs 70000 mark. Minor short-term corrections may occur, but the broader outlook for gold remains bullish, he added.
Bullion broke the $2,400-an-ounce mark for the first time on Friday, climbing as much as 2.5% to $2,431.52 before erasing gains to fall as much as 1.4%.
The precious metal has advanced more than 13% so far this year, exceeding the 13% advance registered for all of last year, according to brokerage Nirmal Bang.
Gold, with a new life high in place and price able to sustain above the previous lifetime high indicates that it has entered a bull market, according to asset management firm DSP.
What to do with your current investments?
“Equities are at about 5% (this should be higher in the latest numbers, yet to be released) of Indian household savings – We remain confident that this no. is set to increase to double digits sometime in this decade on the back of better awareness, social media, stable government, past returns, strong economic prospects and lack of other alternates…,” fintech platform GoalTeller Co-Founder Vivek Banka says.
On gold investment, he is of the view that gold should be at least 5% of one’s portfolio but not exceeding 10% at the max.
With gold prices rising by over 1% since the war broke out in West Asia, experts are of the view that this reason is enough to invest in gold. There are several other supportive factors along with its safe haven appeal in times of uncertainty that will boost prices of the yellow metal further.