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Akshaya Tritiya is seen as an auspicious time to buy gold and, given all indicators, this year seems to be the best time to cash in on the opportunity. This is because, after years of underperformance, gold could give you lucrative returns over the period of next year. Technical and fundamental factors suggest that gold prices are going to go up from here. Currently, gold prices are trading at Rs31,327 per 10 grams.
There are several factors that could contribute to the gold performance. For example, after a stellar performance in 2017 equity markets have started to wobble. Another trigger is the trade war between the US and China that has shaken the entire world leading to weakening currencies. If that was not enough commodity prices, driven by a rally in crude oil, could result in an increase in inflation rate.
Kishore Narne, Associate Director Head – Commodity & Currency, Motilal Oswal Commodities, says, “We expect gold to rally 30-35% over the next two years and with rupee being stable at current levels we can see domestic prices reaching in excess of ₹40,000 per 10grams.
On the global prices, he adds that a target of $1480-1530 is expected for 2018. In a slightly more bullish scenario, if global equity markets indeed see a downturn and if volatility spikes, gold could move towards $1580 levels as well. “On the domestic front, Rs.28800 – 29300 zones should act as a strong base for the year and an upside move towards Rs.34000 – 34500 towards year-end and next year should see a move towards ₹40,000.”
Gold as an asset class did not perform much over the last three years. The yellow metal gave very low returns the on the backdrop of recovery in global economic growth and buoyant equity markets and unwinding of easy monetary policies. But with global scenario changing now, it is very likely that gold will go up from here on.
Sunil Sharma, CIO – Sanctum Wealth Management, says, “There are geopolitical factors at play that could lead to a rising interest in the precious metal. However, Gold remains a non-interest bearing asset and a non-cash flow producing asset. Therefore, we advise investors to allocate a small proportion of Gold in their portfolios.”
Before investing do not forget the golden rule which says that gold is a good diversification tool and not more than 15 percent of your portfolio should be invested in the metal. Narne, says, “We advise investors to have around 8-10% gold as part of their conservative portfolios and around 15% in aggressive portfolios as part of their asset allocation strategy.”
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