Mumbai: Investors would be better off staggering their purchases of gold over the next few months than buying lumpsum, said analysts. This is because the prices of the precious metal could witness some sharp pullbacks following the recent run-up in their value, they said. The longer-term bull market in gold however remains intact.
“We expect gold to correct by 5-7% before the next leg up and a buy on dips is recommended,” says Manav Modi, bullion analyst at Motilal Oswal Financial Services.
Over the last one month, gold price in dollar terms has moved up by 6.3%, while in rupee terms it is up 7.1%. The Nifty has shed 0.7%. In this calendar year, gold gained 28.8% in dollar terms, while in rupee terms it gained 21.2%, compared to the Nifty’s gains of 15.3%.
“Despite tailwinds, gold prices may remain volatile in the near term as any severe volatility in risk assets may feed into gold prices,” said Vikram Dhawan, head commodities and fund manager, Nippon India Mutual Fund. “A large open interest in COMEX may also weigh on the gold prices in the very near term.”
In the past 20 years, gold has usually performed well in the lead-up to US elections, and the stakes are higher than ever as the next election approaches, said Dhawan.
“Central bank buying has been robust so far this year and physical demand has held up despite steep rise in prices,” he said.Financial planners are asking investors not to rush and buy the yellow metal. They are recommending stagger their bets over the next 3-6 months. “Investors could buy gold to diversify financial portfolios, take a staggered approach and allocate 10% of their portfolio assets to gold,” said Amol Joshi, founder, Plan Rupee.Gold prices could touch ₹86,000 per 10 grams over the next two years, though there will be sharp moves, said Modi.
“The bullish trend in gold remains intact over a longer period in the wake of the escalating geopolitical tensions and expectations of more interest rate cuts by the US Federal Reserve,” he said.