February 18, 2024
Gold Prices Show Tepid Growth Amidst Bullish Equity Market Sentiment
Gold & Silver Prices Finance

Gold Prices Show Tepid Growth Amidst Bullish Equity Market Sentiment

Gold Prices Show Tepid Growth Amidst Bullish Equity Market Sentiment

Gold Prices Show Tepid Growth Amidst Bullish Equity Market Sentiment

In recent months, gold rates have experienced modest growth, lagging behind the robust performance of the bullish equity market driven by falling bond yields, healthy economic growth, and easing inflation. Over the past six months, domestic spot gold prices have seen a slight uptick of approximately 6%, in contrast to the Nifty 50, which exhibited a more significant growth of around 13%.

As of January 16, gold prices for the current month have witnessed a marginal decline of approximately 1%, while the Nifty 50 has demonstrated an upward trajectory, registering an increase of over 1%. Analysts attribute this subdued performance to fading optimism around rate cuts, increasing risk appetite for equities, and strong domestic macro indicators.

Experts suggest that gold’s performance in January aligns with other commodities, as buyers adopt a cautious stance following a 6% rally in the last six months. The outlook for gold remains positive for the year, considering macroeconomic uncertainty, geopolitical tensions, and expectations of rate cuts.

Analysts anticipate that rate cuts, if implemented, could put pressure on the US dollar, potentially boosting gold prices. Growing expectations of a rate cut by the Federal Reserve in June 2024 may influence the Dollar Index, creating a significant trigger for gold prices. Additionally, geopolitical uncertainties, slowing global growth, and economic concerns strengthen gold’s appeal as a safe-haven asset.

While short-term equity-positive triggers may lead to corrections in gold prices, the medium-term weakness of the US dollar remains positive for gold. Analysts remain positive on gold, expecting it to perform well in 2024, with factors such as central bank gold buying, rate cuts by key central banks, geopolitical tensions, concerns about the Chinese economy, and possible weakness in the US Dollar Index contributing to its potential rise.

The ideal allocation of gold in a portfolio varies among experts. Some recommend keeping 20-25% through multi-asset allocation funds for the long term, while others suggest allocating around 10% of holdings in gold. Gold ETFs and sovereign gold bonds are preferred investment instruments, offering a hedge during turbulent times. Investors are advised to consider allocating a portion of their portfolio to gold as insurance, especially amid heightened geopolitical tensions.

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