On the back of global recession likely to take over given the coronavirus grip across markets, the gold has once again garnered appeal as a safe-haven and a perfect hedge in times of geo-political and socio-economic turmoil. And in its wake while the global price of gold surged to 7-year high levels, in the domestic markets gold breached levels of Rs. 43000 per 10 gm on Monday.
So, if you considering the current crisis which has seen equities too fall sharply on a one-day basis not seen in years both locally and in Asian markets and the likely momentum in the bullion are considering to allocate some of your surplus in the metal. Here are some pointers to keep note of:
Taking Refuge in Gold
As for the equities their fate is still not known with the relentless fall, investors are taking refuge in gold and bonds and have turned rather extra cautious with their investments. And since the Monday's climb, gold has again shown huge fall and on the MCX it is quoting lower by Rs. 988 at Rs. 41, 397 per 10 gm.
And this retracement in the price of gold as per a technical analyst is attributed to short-term buying exhaustion that is the result of the rally.
Factors Responsible for the Rally in Gold
In the two months of the ongoing calendar year, the precious commodity gave 12% return. While during the last year, it gave a whopping 20-25% return.
1. Coronavirus infection -latest threat
2. US-China phase one deal
3. Global economic slump
4. Loose monetary policy by most central banks
5. More of gold hoardings by central banks world over\
6. Brexit deal
Invest for Long Term In Bullion As Current Rally May Be Short-Lived
So, what one needs to give a thought to is that gold as a long term investment avenue will only serve one's purpose as in the short term we may again see a rally in the bullion but that shall consolidate in a range. Also, another factor that may bottom out and is currently fuelling the price of metal higher is the investment demand in the yellow metal. For the month of February, all of the gold ETFs netted huge inflows. And the current rally in the metal is seen by experts to be short-lived.