Gold 6% Off All-Time Peak. Should You Invest Now Or Wait?

Gold prices have cooled off over past few weeks after soaring to their highest levels ever thanks to uncertainty around the coronavirus pandemic. Domestic gold futures are about 8 per cent off an all-time peak of Rs 56,191, registered last month, in tandem with global benchmark rates which have eased 6 per cent. Although many analysts believe the precious metal is in a long-term uptrend, is it wise to invest in gold now, or wiser to wait for some more correction, to lock the lowest of rates in the current scenario?

While investors assess the still-increasing COVID-19 cases in many parts of the world, forcing authorities to consider new measures to tackle a second wave of infections, financial markets have gained some ground from record lows logged in the past few months.

In India, the number of COVID-19 cases reached 5.49 million by Monday morning, according to government data.

Benchmark equity indices Sensex and Nifty have retraced about half way from their recent lows.

While many wealth planners say one can accumulate gold for long term at any given point in time, their views vary on how much weight should be given to the precious metal in an investment portfolio, ranging between 10 per cent and 15 per cent in most cases.

Looking at the current global economic conditions, the uncertainty around the US presidential elections and geopolitical tensions, gold will give a positive return in the medium to long term, according to Manoj Kumar Jain, director and head of commodity and currency research at Prithvi Finmart.

But what about short-to-medium term?

Traditionally, any fall in risk-appetite pushes investors to safer bets such as gold, often considered a hedge against uncertainty in the financial markets as well as inflation, which can be best understood as the rate of increase in prices of select goods and services.

"Buy On Dips"

"As the global uncertainty is still on, gold continues to be a good portfolio diversifier... Timing the gold market is not advisable as it is better to do staggered buying rather than wait for more correction," Ravindra Rao, vice president-head commodity research at Kotak Securities, told NDTV.

On Friday, Multi Commodity Exchange gold futures, expiring October 5, rose by Rs 267 - or 0.52 per cent - to end at Rs 51,720. At the current level, gold futures are off Rs 4,471 from their peak of Rs 56,191, registered on August 7. Globally, Comex gold futures - the global benchmark for deriving the price of the yellow metal - were at $1,962.10 per ounce.

"Gold has witnessed a decent correction from its peak especially in Indian markets due to appreciation in the Indian rupee against the US dollar," he said.

Currently at 73.45, the rupee has recovered 4.50 per cent from an all-time low of 76.91 against the greenback, registered in April this year.

"Those looking for medium to long term investment in gold can buy and accumulate on every dip in the range of $1,940-1,880 per ounce. At MCX, Rs 51,100-50,000 appears to be a good range to buy and accumulate in the domestic market," Mr Jain said.

"Gold could retest $2,050 per ounce again and in the domestic market, Rs 54,000 is very likely in next 3-6 months," he added.