Current record highs not high enough to steal gold’s sparkle till next Akshaya Tritiya

As India celebrates Akshaya Tritiya today, it gives people a reason to buy gold. However, investors willing to put their money in the yellow metal, must also consider its long-term prospects before taking the plunge. It has been a top performing asset class and outperformed many of its peers. As the prices remain elevated, is it prudent to invest in gold?

Akshaya Tritiya is considered to be an auspicious occasion to buy gold jewelry according to Hindu mythology.This is a day when people worship Lord Kuber to bring happiness and prosperity to their lives. The day is earmarked for new beginnings, be it a new venture, activity, construction or business.

Indian jewellery demand might take a backseat amid record high prices, a Kotak Securities report revealed. Domestic gold prices have given near 10% returns so far in 2023 and this precious metal is trading near record highs, the report said.

Buying may take a backseat this time around as prices have shot up significantly this year. The World Gold Council (WGC) is of the view that gold could see a lukewarm response this time.

“Gold purchases are an inseparable part of Akshaya Tritiya celebrations for millions of Indians as a sign of prosperity, and it signals the start of seasonal buying. Though a major gold buying festival, this year Akshaya Tritiya faces life-time high prices of gold and a lukewarm response from consumers over the last few weeks," Somasundaram PR, Regional CEO, India, World Gold Council said on his expectations from Akshaya Tritiya, this time around.

Meanwhile, Nirpendra Yadav, Senior Commodity Research Analyst at Swastika Investmart, sees a robust demand for gold this time around. On this auspicious festival of Akshay Tritiya, gold prices are looking firm as the demand from the retail customer is also robust ahead of the marriage season, he said.

“A retail customer who wants gold immediately for their own use may buy it in the form of jewelry. While those who are thinking of buying gold jewelry after 6 months to 1 year should hedge the gold prices with digital gold or ETFs as the trend in gold is bullish and it may take the gold prices upward, thus prices may remain costly,” he recommended.

Outlook
Seasonality patterns also suggest a slowdown in Chinese local gold consumption, which could weigh on wholesale gold demand in April and May, the Kotak Securities report said, quoting the WGC.

The silver lining could be the demand for yellow metal from Central Banks and traction towards Exchange Traded Funds (ETF).

The demand remains robust and the trends in gold purchases by Central Banks via ETFs might continue amid rising prospects of a Fed pivot and a global economic slowdown, the Kotak report said.

“CB buying, after touching a record high of 1,136 tonnes in 2022, is expected to continue the trend in 2023. The PBOC reported an 18t gold purchase in March, the fifth consecutive monthly rise. Whereas, March month saw gold ETFs net inflows of $1.9 billion for the first time in 10 months.” the report said further.

“The gold trend in the upcoming months may remain upside. It has support at 58800 and resistance at Rs 61,800,” Yadav said.

Recessionary fears, central bank buying & dollar weakness are the major factors that could enhance returns till next Akshaya tritiya, Naveen Mathur, Director-Commodities and Currencies at Anand Rathi Shares and Stock Brokers opined.

Meanwhile, expectations remain for gold to trade in the range of $1870-$2190 on Comex (CMP $1985/ounce) for 2023, Mathur added. However, he expects gold to trade with volatility on the MCX over the remaining part of the year.

It could test Rs 64,500 – Rs 65,000 per 10 gm on the higher side in futures contracts ahead of next Akshaya tritiya, Mathur estimated.

Gold has yielded 18-20% returns on MCX from last Akshaya Tritiya (May 3, 2023) to date.

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