Gold Prices At Record Highs: Should You Buy Gold This Dhanteras?

Gold Prices Today | As Dhanteras approaches, gold prices are soaring, now hovering around Rs 80,000 per 10 grams. Just a year ago, gold was trading at significantly lower prices of Rs 60,750.

 So, what's behind this “golden” surge? A blend of strong local demand and widespread market uncertainties is driving this precious metal to new heights. Let's explore the five main drivers behind this significant uptick.

Key Drivers of the Surge in Gold Prices

1. Geopolitical Drama and the US Presidential Race

Geopolitical tensions in the Middle East and the approaching US Presidential elections are other catalysts stirring the gold pot. It's well-known that gold thrives in uncertain times, and 2024 is proving no exception. The allure of gold grows as it is seen as a safer bet during volatile periods. 

2. Central Banks' Growing Appetite for Gold

Central banks are on a gold-buying spree, having lapped up over 1,037 tonnes in 2023 and more than 480 tonnes in just the first half of 2024. Their bulk buying is rooted in fears of potential currency crisis and inflation, solidifying gold’s role as a strategic asset.

3. Russia’s Role in Central Bank Gold Buying

The spike in central banks' gold buying also ties back to sanctions on Russia post its Ukraine invasion. With the US freezing Russian reserve assets and restricting trades, other nations are actively increasing their gold reserves as a strategy for diversification and risk management as a safeguard against similar financial threats.

4. Relationship Between Gold and the US Dollar

Understanding gold's pricing also involves looking at its relationship with the US dollar. Gold is globally traded in US dollars, so when the dollar dips, gold becomes more affordable for those holding other currencies, which boosts its demand. Lately, the dollar's dip has indeed been a boon for gold prices.

5. Interest Rates and Gold's Appeal

The role of the US Federal Reserve is crucial too. After a phase of aggressive rate hikes in 2022, the Fed hit the brakes in 2023, even cutting rates recently for the first time in four years. Lower interest rates reduce bond yields, making bonds less attractive to investors, which in turn boosts the appeal of gold.

Gold Outlook and Investment Advice

While gold prices have slightly declined from last week's highs, the enduring high price level has sparked concerns among jewellers about potential sales drops this Dhanteras, with an anticipated 15-20% decrease in demand compared to last year.

Predicting the future trajectory of gold prices is tricky, with central bank activities, inflation trends, and economic shifts all playing into the forecast. However, the broader trend suggests that, while short-term fluctuations may occur, gold remains an attractive asset for diversification and inflation protection through 2024 and beyond.

Investors should consider allocating about 5-10% of their portfolio to gold to maintain balance and secure long-term financial health.

Smart Options to Invest in Gold

• Gold ETFs: Gold ETFs are an efficient investment option available on exchanges like the NSE and BSE. These ETFs function similarly to equity shares, allowing you to buy and sell them during market hours through a demat account. When selecting a gold ETF, evaluate its fund size, liquidity, tracking error, expense ratio, and its premium or discount to the net asset value (NAV).
• Digital Gold: Digital gold offers a convenient and flexible way to invest in gold with a minimum investment of just Re 1, eliminating the need for physical storage. This option allows you to buy and accumulate gold in secured vaults, accessible online, thus providing both ease of access and liquidity.
• Sovereign Gold Bonds: These government-issued bonds are another way to invest in gold without physical possession. They offer a 2.5% annual interest rate, free from the risks of theft associated with physical gold. However, with the government halting fresh issuances, these are only available on the secondary market, often at a premium and with less liquidity.
• Gold Coins: Banks and certified dealers offer 24-karat gold coins in tamper-proof packaging, complete with purity certification. These coins are priced according to daily market rates, providing a transparent and competitive investment option. You can purchase gold coins through online platforms, mobile banking applications, or directly from designated bank branches.

Here’s to a golden Dhanteras! May your investments shine bright and your decisions bring prosperity. Happy Dhanteras!

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