Gold as an asset class in India lost to other financial investment due to government's push as well as other macro cues that favoured other investments. Nonetheless, the trend has reversed to now boost the demand of the yellow metal higher as a varied of factors including the continued depreciation in rupee, global equity market unrest are providing an edge to the precious metal.
Factors that could trigger gold prices higher
1. Rupee's downside and further forecast to low levels may bring back the lost sheen in gold: During the week gone by, MCX closed reached at an intra-day high of Rs. 32,311 per 10 gm. And in the week starting Monday, spot gold with positive indications and remained range-bound after reaching a high of $1,233 an ounce.
2. US equity market sell-off: The sell-off in the US equities market cast its impact over the rest of the world markets. The fall in the previous week has been imminent in creating a spill-over on to the emerging market economies. And if the current levels of 25,444 on the Dow will be crossed, US equity index could fall to 23,500.
3. Dollar movement is mixed: The dollar index which is a measure of the greenback's strength against a basket of other major economies is showing sideways movement and any gains will likely cap the gains in the precious metal and vice-versa. Currently it is trending at a close of 95.71.
In the Indian context, the sentiment this year for gold during the festive season shall be bright given the favourable macro outlook. Last week, gold reached to levels of Rs. 32,311 per 10 gm and it is highly likely the levels next year will touch Rs. 37,000 by the next year.
So, to make a good return, you can consider investing in the metal and earn probably higher than asset class and when it comes to what investment you should, one will be better off by investing in gold bonds, sovereign gold bond as against physical gold because it entails making charges as well as which is quiet hefty.
However, some of the experts opine that investment can be made in any of the gold asset as price movement gets reflected across all of the gold-linked products.
Further at a time, when equities are underperforming and are highly volatile, you can hedge your investments and reduce the inherent risk associated with equity investment by taking a bet on the yellow metal.