Will Gold Demand Surge This Dhanteras? Here's What Experts Say

Gold buying is considered auspicious during Dhanteras - the first day of the Diwali festival. Investors believe that gold purchase brings financial security to their portfolio. According to experts, gold is a safe haven metal and whenever there is a risk aversion in the market, the yellow metal turns bullish. However, looking at the trend of gold prices in the recent past, many investors may be contemplating whether it is a favourable time to invest in gold this Dhanteras. (Also read: Here Are 5 Types Of Gold Investments You May Choose From)

Dhanteras 2019: Here's what experts say on current gold prices and demand

Gold prices are now down from last month's record high of about Rs 40,000 per 10 gm. While some experts believe that gold demand may see a slight boost this festival season, others say that it's not going to be a shiny Diwali.

"A price band of Rs 35,500-Rs 36,000 per 10 gram can boost demand. People with definitive needs that is wedding or any other special occasion in the family would go ahead with their buying while the retail clients would show moderate purchasing behaviour during Dhanteras," says Brijesh Parnami, CEO, Coretree Wealth Advisory Services.

Mr Parnami expects that the schemes launched by jewellers including exchange of old gold and heavy discounting on making charges could also be a good demand booster. "These factors may give some positive flip to buying sentiments during upcoming festival season," he adds.

According to Sudeesh Nambiath, Head, India Gold Policy Centre (IGPC), Indian Institute of Management, Ahmedabad, the macro picture isn't very strong for public at large to splurge on high end jewellery. "However, people will do a customary purchase to keep with the tradition," he explains.

(Also read: All You Need To Know About Sovereign Gold Bonds)

According to Amit Pabari, Managing Director, CR Forex, "Diwali is not going to be very shiny amid the poor consumer sentiment dented by the gloomy economic picture, with every key indicators contracting and rising uncertainties on US-China trade front."

Should one invest in physical gold or gold ETFs, gold bonds?

There are a variety of alternatives where one can invest such as gold exchange-traded funds (ETF), sovereign gold bonds or equity mutual funds. "There are plenty of platforms including e-commerce websites as well from where one can buy the same," explains Mr Parnami.

Sovereign Gold Bonds (SGBs) bear interest at the rate of 2.5 per cent per annum on the amount of the initial investment. The buyer does not have to pay any making charges while buying the gold exchange-traded fund.

"Advantages of buying digital gold are surety backing of 24 karat gold, no making charges or storage hassles, trade as per your convenience. You can easily convert 'gold' into 'cash'," he explains.

Future trend of gold prices and demand:

The global factors would further lead to define the trend for gold demand.

"Roadmap of rate cuts by the US Federal Reserve, country's fiscal situation, geo political tensions with recent being Turkey's stand on Syria, and the Brexit deal as we see is closing in. The economic forecasts and recent alarm signs from International Monetary Fund (IMF) with forecast of global growth at slowest since 2008, fear of the $19 trillion corporate debt and the fact that central banks will be short of ammunition is definitely a worrying factor," Mr Nambiath explains.

However, he says there is potential for gold prices to cool down further, possibly till mid-November.