The gold market is highly volatile now on the back of the Russia-Ukraine geopolitical uncertainties. The metal prices have crossed $1950.40/oz in daily highs today. Investors are gaining confidence in gold again and the reason is gold is playing an important role as a hedge. Considering heavy inflation gold is being a hedge, while during a war situation gold is being a safe haven for investors at present.
According to a World Gold Council (WGC) report, gold leaped 8% in Q1, which is its best quarterly performance since Q2 2020, after gold rose a further 2% in March. Additionally, inflows into gold ETFs have totaled 269t (US$17bn) in Q1, the highest quarterly total since Q3 2020, while Q1 US Mint gold coin sales hit the highest level since 1999.
The WGC report also mentioned, "It was among the best-performing assets amid significant weakness in both equity and bond markets. In a period marked by economic uncertainty and increased volatility, gold proved a reliable source of diversification and wealth preservation." But, the US Treasury is yielding better in April, compared to March, which might impact gold's performance further.
However, Indian domestic markets are performing differently. WGC said, "Retail demand remained sluggish during March as buyers postponed purchases in anticipation of a correction in local gold prices. Wholesale purchases by retailers and manufacturers also remained muted as they opted to close their books ahead of the end of the financial year." But, analysts are suggesting investors buy gold to diversify portfolios and invest at least 15-20% in gold, considering gold has given great returns in the past 1 year.