Gold As A Safe Haven: Why Gold Is Set To Shine In The New Hindu Financial Year?

Muhurat trade on Diwali marks the start of the new Hindu financial year, and gold is attracting more and more investors as a safe haven during the current economic turmoil. Gold is expected to be more valuable than ever in the portfolios of astute investors in the face of high inflation, erratic stock markets, and concerns regarding the global economy. Over the past year, gold has shown to be a fantastic investment class. Gold has returned almost 39% in the last samvat. Compared to the nifty 50 returns, which have yielded returns of about 27%, this is far superior. An important question is whether gold will shine as brightly as it did during the previous Samvat in the new financial year, let's take the opinions of the market analysts to make a wise gold investment decision.

4 Reasons Why Gold Is Set To Shine Brighter Than Ever

As per Palka Arora Chopra, Director at Master Capital Services, here are the 4 reasons why gold is set to shine in the new financial year.

Historical Significance

Gold has long been a hedge against economic downturns, offering protection during times of financial instability. Historically, during events like global recessions, currency depreciation, and geopolitical turmoil, investors flock to gold, elevating its value. It is deeply ingrained in Indian culture as a wealth protector, passed down through generations. Furthermore, investors are flocking toward gold to lessen the risk from other assets like equities and real estate.

Economic Volatility

Increasing geopolitical tension, especially in Europe and the Middle East is impacting financial markets globally. It continues to disrupt supply chains, oil prices, and global interest rates, creating an environment ripe for gold to act as a buffer. Many Indian investors use gold as protection against inflation and currency devaluation. As we enter the new Hindu financial year, gold holding is expected to become a protection against these challenges.

Gold as a Portfolio Diversifier

For seasoned investors, diversification is crucial in managing risk and ensuring steady returns, and gold has consistently shown a low or even negative correlation with other asset classes, such as equities and bonds. During times when stock markets face downturns, gold tends to hold or even increase its value, providing balance to an investor's portfolio. Indian investors recognize gold's importance in establishing a well-balanced portfolio, and its durability is unparalleled by other assets.

Modern Avenues for Traditional Gold Investment

With evolving technologies, investing in gold has become easier and more flexible. Digital gold and gold-backed securities, like Sovereign Gold Bonds, offer modern, flexible ways to invest in gold. These instruments have opened up gold investment to a broader audience, especially tech-savvy investors and millennials who seek convenience and security in their investment choices. These digital avenues combine the timeless appeal of gold with modern convenience, helping investors incorporate gold into their portfolios seamlessly.

Gold Year Ahead

As the Hindu financial year unfolds, gold's status as a "safe haven" asset will likely reinforce its demand. Economic instability, with potential market volatility due to Trump's re-election and protectionist trade policies, along with inflationary pressures and cultural importance, make gold a favorable investment for stability and potential growth. Whether through physical gold, digital investments, or gold-backed securities, Indian investors are likely to find golden security in this timeless asset, as per Palka Arora.

As the new Hindu financial year begins, gold is an appealing asset to a balanced portfolio. Its historical stability, widespread acceptability, and position as a protection against inflation. As a beacon of stability and prosperity, gold is set to continue shining brightly in the months to come, providing the security that many investors seek in uncertain times, the analyst further added.

How Gold Is Well-Positioned To Continue As A Safe Haven Amid Market Volatility In The Coming Year?

As per Mr. Soumya Sarkar, C0-Founder, Wealth Redefine, (AMFI registered MFD), gold has stood the test of time as a safe-haven asset, consistently providing stability and protection during periods of economic uncertainty. As we approach the new Hindu financial year, market dynamics suggest that gold may shine even brighter. This forecast is driven by ongoing inflation concerns, rising national debt levels, and a backdrop of geopolitical conflicts in regions like the Middle East and Eastern Europe. Additionally, countries such as Russia and China have accelerated their gold reserves, highlighting their strategic value on the global stage.

Gold's safe-haven status stems from its unique ability to preserve wealth, especially when traditional assets like stocks and bonds face volatility. With inflationary pressures prompting central banks worldwide to adopt policies that could dilute currency value, investors often turn to gold as a safeguard against potential currency erosion. Gold's low correlation with other asset classes also makes it a powerful diversification tool, offering a buffer during economic downturns. Given these conditions, gold is well-positioned to continue as a safe haven, offering security amid market volatility in the coming year, he further added.

Will Equities Outperform Gold In The Coming Years?

Gold has been a great investment class in the last one year. Last samvat, gold has given a return of approximately 39%. This is much better than the nifty 50 returns which have given approximately 27% returns. Important question to answer in the coming summer weather Gold will shine as much as it did in the previous Samvat. Currently gold is trading at USD 2736 levels which is near its all-time high. The remarkable journey of gold prices in the last one year can be attributed to the purchase by the central banks across the globe. Gold is considered as a reserve currency and a natural hedge to inflation, according to Gaurav Goel (Entrepreneur, SEBI registered Investment Advisor).

Central banks across the globe have been selling the dollar and buying Gold. This trend is likely to continue in the coming years as the domination of US and US dollar is likely to wane in future. China has emerged as a strong economy and is likely to become the largest economy in times to come. However, the Chinese Yuan becoming a dominant currency is unlikely to happen in the near future. In such a scenario central banks are likely to continue the trend of buying more gold in their treasury.

"We expect the gold price to appreciate further in the coming Samvat. However, we do not expect the gold price to rise as fast they did in the previous year. Gold will remain an important investment class but to expect unprecedented returns from Gold is a little bit too much to ask for. Investors should have a portion of the wealth invested in gold but it should be one of the many asset classes they should invest in. In the next few years, we expect Equities to outperform gold. So it would be wise for investors to invest the hard earned money basis the asset allocation and the risk profile that they have," added Gaurav Goel.

How Gold Continues To Serve As A Reliable Store of Value Amid Global Economic Uncertainty?

Gold's role as a safe haven is more significant than ever as we enter the new Hindu financial year. Amidst global economic uncertainty, geopolitical tensions, and fluctuating currencies, gold continues to serve as a reliable store of value.

This year, several factors are set to boost gold's appeal. Inflation remains a persistent concern, prompting investors to seek stable assets. Additionally, central banks are maintaining high levels of gold reserves, reinforcing its global credibility. Domestically, traditional festivals and weddings will drive demand, backed by a resurgent post-pandemic economy, as per Aksha Kamboj, VP of India Bullion & Jewellers Association (IBJA) and the Executive Chairperson of Aspect Global Ventures Pvt. Ltd.

"Gold's intrinsic qualities-a hedge against inflation, liquidity, and cultural significance in India-ensure that it will remain an attractive investment. The Hindu financial year is often a time for strategic financial planning, and gold's enduring value offers reassurance to both seasoned investors and new entrants. With a legacy of preserving wealth across generations, gold is well-positioned to shine as an essential part of any diversified portfolio in the upcoming year," Aksha Kamboj added.

Should You Diversify Gold Into Other Precious Metals In The New Hindu Financial Year?

Gold's unmatched status as a financial anchor in times of uncertainty. However, with the new Hindu financial year upon us, it's prudent to consider whether diversifying into other precious metals can complement gold investments.

"Silver, for example, holds strong potential due to its dual role as both a precious and industrial metal. With the surge in green technologies-such as solar panels and electric vehicles-silver's industrial demand is set to increase, offering a balanced mix of growth and security. Platinum and palladium also have their merits, driven largely by automotive and industrial applications. While they can be more volatile than gold, strategic investment in these metals can offer higher returns during periods of economic expansion," said Aksha Kamboj.

"Diversification is key for minimizing risk and capitalizing on varied market trends. While gold should remain the cornerstone of a robust portfolio, adding silver or other precious metals can enhance potential growth. This blend provides resilience and opportunities aligned with both traditional and modern market dynamics, making it a wise approach for the upcoming financial year," Aksha Kamboj further added.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.