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Reasons That Triggered Gold Fall; Should You Invest Now In The Yellow Metal?


Gold prices continue to remain volatile as the yellow metal's price registered a decline in the global markets. Today's fall was so sharp that the prices hit three-month low. The main reason behind the dip in gold prices has been attributed to robust Dollar as a result of strong interest rate rise by US Federal Reserve. Spot gold registered a dip of 0.2% to settle at $1,817.39/ounce. It is worth mentioning that Bullion has so far lost more than 3% this week. Meanwhile, US Gold future tumbled 0.5% to settle at 1,816.40/ounce. Meanwhile, in India the prices of Gold futures on MCX registered a fall of 0.3% to settle at 50,421/gram.

Reasons That Triggered Gold Fall; Should You Invest Now In The Yellow Metal?

Analysts are baffled with the unexpected fall of gold when they were anticipating its demand to go up. The Dollar Index is likely to register its sixth successive weekly gain as it continues to hover near 20 years high. The surging US interest rates coupled with bond yields have also emerged strong factors that are causing the yellow metal's fall. Any possible gains in Gold may be capped with several rate hikes that have diminished the appeal of the precious metal. It is almost becoming a non-yielding bearing asset because of these factors.

The recent decline in the prices of gold has also wiped out the gains that it made when the war between Russia and Ukraine broke out. The war had led the prices of gold to surge to near record levels during mid-March earlier this year.

Should you Invest in Gold?

The prices of Gold may have nosedived now and failed to maintain the momentum when Russia-Ukraine war led the yellow metal to register a strong surge in the prices. However, Gold has not been used for generating returns instead it is a hedge that offers protection when uncertainty looms large and inflations grips an economy. It is ideal to invest in Gold but in the paperless form.

Experts believe that the value of gold rises when inflation hits the economy and marketsbecome volatile. As of now there is pause in the retail demand of gold in India due to lesser auspicious days and buyers have postponed their purchase in the hope of better prices of the metal. There is a strong chance of gold's price moving up. There is a possibility that US Fed may slash interest rates to boost growth and some time in the future a U-turn in the policy may be in the offing. The move will certainly prove positive for the metal.


Meanwhile, for now it is ideal to invest 5 to 10 percent in the yellow metal. It is appropriate to invest in gold If its prices register a dip of less than 5% of the portfolio. It is because you can allocate nearly 10 percent of the portfolio towards the purchase of gold. However, it is ideal to invest in gold in paperless form. You may choose to invest in Gold Exchange traded funds or ETF, sovereign gold, and the gold saving funds.

The reason why you should invest in paperless gold is that it will eliminate your worries of storing it.

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