Gold rates in India corrected sharply in two consecutive days, with 24-carat gold in 100 grams falling by at least Rs 18,500 and 10 grams by Rs 1,850. With that, the yellow metal has pulled back from its new record highs. However, despite the latest fall, gold prices are still near their all-time high and expensive. In such a case, is it the right time to buy gold?
The 24-carat gold price dropped by Rs 13,600 per 100 grams and by Rs 1,360 per 10 grams on July 24, followed by another fresh decline of Rs 4,900 and Rs 490 on July 25. With that, from July 24-25, gold prices have plunged by Rs 18,500 in 100 grams and by Rs 1,850 in 10 grams of 24 carat.
This comes after gold prices were in a winning streak over the past few days. On July 23, all gold prices touched a new all-time high in India. 24-carat gold had clocked a new record of Rs 1,02,330 in 10 grams and Rs 10,23,300 in 100 grams.
Despite the latest correction, gold is still up by 2.10% across carats in India for the month of July.
As of now, 10 grams and 100 grams of gold prices in 22 carat are at Rs 92,090 per 10 grams and Rs 9,20,900 per 100 grams respectively. While gold prices in 18 carat are currently at Rs 75,350 per 10 grams and Rs 7,53,500 per 10 grams.
Should You BUY Gold Still?
According to Ross Maxwell, Global Strategy Lead at VT Markets, gold has hit a new one-month high, as once again investor sentiment shifts to the haven due to a combination of geopolitical and macroeconomic factors.
The analyst pointed out that many of the factors that have driven Gold to record highs persist and can remain catalysts for Gold to continue higher in the short term.
For instance, ongoing geopolitical issues such as tensions in t he Middle East and Ukraine continue to create a risk-aversion environment, in which Golds appeal as a safe-haven thrives. The USD continues to come under pressure, and this makes it cheaper for people buying in non-dollars and therefore increasing demand, he added.
"This weaker USD is being fuelled by slowing growth and a hope that the FED will lower rates, which is another environment that Gold benefits from as it reduces the opportunity cost of holding non-yielding assets such as Gold," said Maxwell.
Furthermore, the analyst said, "Gold is also technically bullish, and as long as this remains the case, then speculative trader sentiment will also continue to look for opportunities to buy Gold."
Gold is seen as an alternative pick against other assets.
World Gold Council examined gold and private equity performance across four historical liquidity events: the 2008 Global Financial Crisis, the COVID shock in early 2020, the Q4 2018 credit squeeze, and the Eurozone debt crisis in 2011.
In its findings, WGC said, "In these four events, gold performance stayed within one to two standard deviations of its long-term distribution, indicating relatively contained downside risk. By contrast, private equity returns were impacted in all four events, with delayed losses due to valuation lags and limited liquidity. This comparison highlights gold's potential to respond more promptly and resiliently to market stress."
WGC pointed out that gold may not offer the outsized return potential of private credit - or any private market investment for that matter - but it brings a set of attributes that are increasingly hard to ignore:
- A shock absorber, as seen in our stress-tested portfolio. Gold tends to respond immediately to market dislocations, preserving value when drawdowns in other assets, including private credit, take time to surface.
- A source of liquidity, providing flexibility when capital calls spike or investor redemptions loom. It gives managers breathing room, allowing them to hold on to long-term positions without forced sales.
- A diversification asset, especially in periods when traditional diversifiers, from hedge funds to real estate, exhibit rising correlations.
In short, gold complements private investments by addressing their blind spots, WGC added.
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. Neither 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.
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