Gold Prices In India, 24-Carat Rises By 3.5% YTD; Why Invest In Yellow Metal During 2024 Election Year?

Gold prices have seen a significant jump year-to-date with 24-carat and 22-carat of this pristine metal rising by 3.5% so far. This month, gold prices also touched an all-time high.

Brokerage Axis Securities believes that gold continues to be the preferred asset class to hold in 2024, an election year.

Gold Prices In India:

On March 16, gold prices slipped by Rs 1 to Rs 100 across 22-carat, 24-carat and 18-carat.

In 22-carat, 10-gram gold is available at Rs 60,590, while 100-gram is priced at Rs 6,05,900, 8-gram at Rs 48,472, and 1-gram is available at Rs 6,059.

Under 24-carat, 10-gram of gold is available at Rs 66,100; 100-gram at Rs 6,61,000, 8-gram at Rs 52,880, and 1-gram at Rs 6,610.

Further, in the case of 18-carat, 10-gram is available at Rs 49,570; 100-gram at Rs 4,95,700; 8-gram at Rs 39,656, and 1-gram at Rs 4,957.

Year-to-date, 22-carat and 24-carat gold in 10 grams have risen by nearly 3.5% each. The highest price level for a 24-carat of 10 grams is at Rs 66,270 which was recorded in the first week of March 2024. Meanwhile, MCX gold touched a lifetime high of Rs 66356 per 10 grams during the same time. They tracked international prices where spot gold hit its own historic high of 2195.20 in early March.

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The reason why haven assets started on a strong footing in 2024 is that interest rate hikes are likely to have bottomed out, with room for rate cuts from global central banks including RBI.

An interest rate cut makes gold appealing in the overseas forex market. While a rate hike is a setback for non-yielding assets and instead boosts dollar and bond yields.

However, there have been significant corrections this week as hotter-than-expected US inflation dampened hopes of as early as June rate cut.

As per Trading Economics data, gold held steady near $2,160 an ounce on Friday, priced in for its first weekly fall in four, amid Fed rate cut uncertainty since hotter-than-anticipated CPI and PPI data and lower initial jobless claims prompted investors to readjust their bets on monetary easing. The chances of a Fed rate reduction in June have now decreased to 58% from 74% seen a week earlier, which dented the appeal of holding a non-yielding asset.

Nonetheless, the data also added, still, gold remained close to its all-time highs, acting as a hedge against inflation and growing geopolitical risks after Russia moved its tactical nuclear weapons closer to NATO.

Why Gold Is the Preferred Pick In 2024, especially In India?

The year 2024 is backed by Lok Sabha elections as the main key factor to influence market-related instruments, coupled with rate cut expectations, inflation and resilient economic growth.

In its latest research note, Axis Securities highlighted that gold price continued its 2022 outperformance in 2023 as well, led by a cool-off in US 10-year bond yields, and rising geo-political tensions. The US 10-year bond yields corrected by 120bps from their peak of 4.99% during Dec’23, triggering optimism in gold prices. Consequently, gold prices crossed $2000/oz once again in Dec’23. In Dec’23 gold prices were up by 1% in both USD and INR terms. It has given returns of 14.9% in INR terms and 13.1% in USD terms in 2023.

Meanwhile, in the year 2024, Axis Securities data showed that in Jan’24, the gold prices were largely stable in INR terms while declining by 1% in USD terms. In Feb’24, gold prices declined by 1% in INR terms but stayed largely flat in the USD terms.

Going forward, Axis Securities note said, “We believe Gold will continue to have an edge over other asset classes in 2024. It will be seen as a tool to facilitate the flight to safety as the risk of a slowdown in the US market will continue to support the gold prices. Fundamentally, the price of Gold is inversely related to bond yields, and any weakening in yields will continue to have a positive impact on the price of Gold.”

It added, “Given current macroeconomic developments, Gold will remain a preferred asset class until uncertainties surrounding the Russia-Ukraine and Middle East crisis subside and will continue to attract investment as a proven hedge against other asset classes. Gold prices will continue to find support from prevailing geopolitical risks as well as concerns over growth and inflation pressures in the global environment. We maintain our neutral stance on Gold and recommend a ‘Buy on Dips’ strategy.”

That being said, the latest correction in gold is yet another buy-on-dips opportunity for investors. Further, the brokerage pointed out four key factors to why remain invested in gold. They are:

– Low yield: Low yields are the driving force for the Gold rally. With central banks at the peak of the rate hike cycle, Gold will continue to attract investments in the near future.

– Slowdown risk mounts over the US market and Gold will continue to look attractive as a hedging instrument to balance the risk.

– Gold is the best anti-inflation asset.

– Gold provides ‘flight for safety’ given the recent geopolitical conflict.