Gold's 30% return since the last Dhanteras has outperformed most asset classes. What is in Samvat 2081?

Dhanteras is synonymous with buying gold and people who bought yellow metal on this day (November 10, 2023) last year were handsomely rewarded with a 30% return in less than a year. Despite the increase, there is still an upside potential of Rs 87,000 per 10 grams by the next Dhanteras, up 10-11% from current levels.

So far this year, gold is up 24%, while its CAGR return over the past five years is 15%.

Its precious metal competitor silver also achieved an even better return of 35% during this period.

This time Dhanteras will be celebrated on Tuesday.

Gold and silver have outperformed all other asset classes and the outlook remains positive due to several factors, including the likelihood of dovish monetary policy from global central banks, weakness in the dollar index and geopolitical concerns.

“Gold is up more than 24% so far this year and has hit consecutive all-time highs, following an upward trend in the overseas market. Both precious metals have outperformed all other asset classes this year, making it an exceptional year for them,” said Anuj Gupta, Head of Commodities and Currencies at HDFC Securities. “We expect investing in gold to be beneficial going forward and deliver attractive returns despite last year's rally. Geopolitical and economic uncertainties, significant global ETF inflows, dovish monetary policies from Western central bankers, the US elections, and a continued lower dollar index will support the bullish trend in gold,” Gupta said. Gupta recommends a 'buy' for gold at around Rs 75,500-76,000 with further accumulation on declines in the range of Rs 73,500-73,700 for the price target of Rs 85,300-87,000 by the next Dhanteras. He sets the stop loss at Rs 71,500.

Expert Prathamesh Mallya, DVP-Research, Non-Agri Commodities and Currencies at Angel One, calls gold a “portfolio diversifier for investors” and further says it could be a substitute for equities in the short to medium term for less risk-averse investors. Geopolitical issues and the US elections are strong triggers for maintaining the gold haven's attractiveness, he added.

As for silver, its safe-haven appeal and industrial utility make it a sought-after commodity.

Gupta said silver is also bullish as stable supply and growing demand have led to an uptrend in silver prices. The long-term outlook remains good as the market expects a fourth consecutive year of structural deficits in 2024 as silver demand massively outstrips supply.

“MCX silver price is set for further gains and may approach the 1,06,000 level. The next target is 1,09,950. Buy silver mini near month futures at around Rs 95,000-95,500 and add the decline of around Rs 92,000-92,500 to the upside target of 1,03,500/1,06,000/1,09,950 and maintain your stop loss 88,000,” said the HDFC Securities expert.

While gold's long-term outlook remains intact, investors with a short-term perspective must remain cautious as experts expect prices to fall due to overheating.

“We expect gold prices to weaken over the next few months before resuming their long-term uptrend as gold as an asset class is extremely overheated,” said Amit Goel, co-founder and chief global strategist at Pace 360. He doesn’t see any significant upside Impact of Diwali on the development of domestic yellow metal prices.

In the last seven years up to 2023, gold prices remained subdued a month before Diwali. The return was 0.2% in 2017, 1.4% in 2019 and 0.7% in 2020, while it decreased by 0.2% in 2018. In 2021, 2022 and 2023 the returns were 3% each.

“Gold has historically witnessed high volatility in the run-up to Diwali. However, much of this is not due to Diwali but due to global macroeconomic factors. In the last 10 years, the average return in the month leading up to Diwali has been only slightly positive.” “Most of this positive return is due to the last three years where gold prices have increased significantly in the run-up to Diwali,” Goel informed.

However, gold's festive appeal coupled with the upcoming wedding season could lead to a surge in demand for physical gold, regardless of where prices lie, the Pace 360 ​​expert said.

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not reflect the views of The Economic Times.)