Why has gold rebounded?
“Gold continues to advance, amid a weaker dollar and uncertainty over Russia’s internal struggle that occurred over the weekend, although prices remained near three-year lows. months as traders weighed the prospects of further interest rate hikes by the US Federal Reserve,” Manav said. Modi, Analyst, Commodities and Currencies, Motilal Osatwal.
Heavily armed Russian mercenaries withdrew from the southern Russian city of Rostov on Sunday, while authorities still investigated the mercenary leader whose weekend mutiny appeared to pose a major threat to President Vladimir’s regime Putin, aged 23.
“Market participants have taken a more cautious approach as major central banks continue to fight inflation with rate hikes at a time when it was thought most of them were already on pause and were preparing to move in the opposite direction. Investors will receive a further update on the possible future path of inflation interest rates later this week, while the US PCE Price Index is expected to be released, as This is the Federal Reserve’s preferred inflation gauge and is still far from the Fed’s 2% target,” Modi said.
Motilal expects the broader trend on the COMEX to be between $1,910 and $1,940 and domestically, prices could range between Rs 58,200 and Rs 58,850.
“Spot gold is likely to hold support near $1,910 and rally towards $1,940 levels amid forecasts of weaker U.S. economic numbers. A further pullback in the U.S. dollar and “Treasury bond yields could provide some support for precious metals. However, the expectation of two further rate hikes this year by the US Fed to tame stubborn inflation could dampen bullion price gains,” Raj said Deepak Singh, Research Analyst at ICICI Securities.
“Yesterday, gold prices closed 0.18 percent higher, at levels of 58,403, on safe-haven demand due to political unrest in Russia. Weak gold sentiment data U.S. business was also positive for gold, as it was negative for the dollar index. The FOMC also indicated that the 2% inflation target is still far away and that it will take time to reach it. In the international market, it is trading at $1,927 per ounce,” said Anuj Gupta, vice-president, IIFL Securities.
ICICI Securities expects MCX gold prices to take support near Rs 58,000 and rise towards Rs 58,650 levels.
In Mumbai, a 10 gram 24 carat 999 gold bar trades at Rs 5,865 without GST.
Should you buy at this level?
IIFL sees technically strong support at the 58,000 and 57,700 levels, and resistance at the 58,700 and 59,000 levels. Today, one can buy around the 58,000 to 58,100 levels with a stop loss of 57,700 and for a target of 58,700 to 58,900 levels, Gupta said.
“Gold is currently in a bearish phase, in our opinion it is the right time to invest in gold to reap profits in the medium and long term. The yellow metal enjoys strong support at the 1,900 level $ per ounce. So at the macro level, there is limited downside risk for investing in gold. For the most part, we are at the peak of the current interest rate cycle. With easing in sight since the start of the first quarter of 2024, gold prices are expected to see some strength,” said Colin Shah, MD, Kama Jewelry.
What should you buy? Physical or digital gold?
Aditi Mittal, co-founder of IndiaBonds.com said that while gold is a crucial investment option due to their unmatched love for physical assets, investors have also turned to digital gold, such as sovereign wealth funds gold, gold mutual funds, gold exchange traded funds. higher yields. When it comes to yield, liquidity, ease of investment and taxation, there are significant differences between them. Each instrument has a different price, and the SGB has a slight price lag since the government sets the price of each tranche, which can sometimes be higher or lower than the actual price of gold. On the other hand, before the daily deadline of 3 p.m., the prices of gold funds or ETFs are decided.
“SGBBs do not have any fund management fees as they are issued by the government. However, transaction fees or brokerage fees may be incurred during the buying and selling process. Similarly, mutual funds Gold investment funds charge an expense ratio that pays for fund management fees, administrative fees, and other fees. Different mutual fund schemes have different expense ratios. These funds generally have cost ratios between 1 % and 2%. Moreover, even gold ETFs have an expense ratio, but this is lower than gold mutual funds covering operational costs and fund management. of yield, the total return of SGBs includes the fixed interest rate of 2.5 per cent paid semi-annually and capital appreciation based on prevailing gold prices,” Mittal said.
Similarly, the performance of the underlying assets which is actively influenced by the price of gold determines the total return of the gold mutual fund. Although returns are directly related to overall market performance, the Gold Mutual fund’s 1% to 2% expense ratio is generally borne by investors, which affects the net return on investment. The performance of gold ETFs is directly linked to market performance based on changes in the price of gold. The expense ratio is also borne by the investor, but compared to Gold funds, the ratio is lower between 0.2% and 0.5%.
“SGBs are overall an excellent choice for investors looking for a low-cost, government-backed investment with tax-free returns until maturity if applied in primary issues announced from time to time. However, gold ETFs and funds could be considered as a viable option. for investors who prefer more liquidity. For investors who want the freedom to withdraw their money at any time, to do so automatically small investments through SIPs or make large investments whenever they want, gold mutual funds are a great option. who have the most liquidity and feel comfortable trading in the stock market should consider the Gold ETF,” Mittal said.
How much gold should you buy?
“The allocation to gold can be maintained between 5 and 10%. Gold prices could be supported by economic gloom and the resulting uncertainties in the immediate future. The path of US interest rates will have the greatest influence on gold prices, as well as movements in the dollar index. At any point in time, a weaker dollar would cause gold prices to rise. SGB is a great avenue because it offers a coupon in addition to the prospects of price appreciation. Gold funds and ETFs are perfect for capturing rising prices over shorter time horizons as they make it easier to make profits,” said Dr Joseph Thomas, Head of Research at Emkay Wealth Management.
Gold is one of the safest asset classes and serves as a hedge against inflation. Therefore, it is always good to diversify 5-10% of your investments into gold. If anyone is considering investing in gold, here is one approach, as explained by Ajinkya Kulkarni, co-founder and CEO of Wint Wealth.
1. When to start: A retail investor cannot time the market. So, a better solution is to stick to your allocation target (5-10%) and not get swayed by the ups and downs of the market.
2. Physical gold or digital gold: Physical gold is subject to 3% GST on purchase, which equates to a capital loss of 3%, physical gold is only advisable if we need it for jewelry or other consumption.
4. Sovereign Gold Bonds (SGB): SGBs have a lock-in period of 5 years. If an investor plans to stay invested for the long term (5 years and above), SGBs are the best gold investment, providing an additional return of 2.5% per annum. Additionally, if held for eight years, the earnings are tax-free. Additionally, one can take a loan from SGB for any short-term needs.