Dhanteras 2021: Buying gold during Diwali ideal way to mix tradition with financial acumen, says CapitalVia Global Research

Purchasing a gold coin or jewellery on the occasion of Diwali or Dussehra is considered a wise decision not only for its monetary value but also for its social value. In India, gold has traditionally been regarded as the safest form of investment. It is associated with auspicious occasions such as Diwali, Dussehra and Akshaya Tritiya in our country. As the holiday season approaches, gold demand rises.

What is your outlook on gold especially given the current inflationary environment? What are key triggers and risks for gold prices in Samvat 2078?

Investors will be paying close attention to the Fed's statements on increasing prices since US inflation has reached a 30-year high. The market has already factored in the commencement of tapering. Traders are now eager to learn when the Fed will raise interest rates for the first time, as well as when future rises will occur. 

How do you sum up Samvat 2077 for Gold?

Samvat 2077 now marked an auspicious occasion for dipping into investment vehicles with the hope of wealth multiplication in the years to ensue. Globally and domestically, there was a flurry of events that have shifted the tide of investment decisions back and gold made a surge last year. After reaching its peak, gold has made a pullback and sustaining in the range of Rs 47,000-48,000.

Q: Will Gold prices reclaim the high of 2020 or will they remain range-bound? What is your strategy on Dhanteras day?

Buying gold during Diwali is not just a tradition but also a wise investment. With jewellers expecting a large number of footfalls, there are many special offers and discounts during the season. Due to this, the demand for the metal has been high. The steady rise in gold prices has been affected by the increased preference for safe-haven assets for hedging purposes in the capital market. With gold’s status as a secure and ever-rising alternative to equities, purchasing the yellow metal during Diwali is an ideal way to mix tradition with sound financial acumen.

Q: What are the various options available in the market to buy gold on Dhanteras day?

Digital gold is a way to invest in and buy the metal without having to physically hold it. Buyers may effortlessly acquire gold in the amounts they require and build up their gold holdings without having to visit a store. The gold will be kept in a vault where you can sell it or convert it into actual gold whenever you choose. 

The government started the Sovereign Gold Bond Scheme in November 2015, with an intent to reduce the demand for physical gold and shift a part of the domestic savings -- used for the purchase of the yellow metal -- into financial savings. The sovereign gold bond, which is issued by the Reserve Bank of India on behalf of the Government of India has been quite successful and around Rs 16,050 crore of investments have came via this bond.

An investor can buy these sovereign gold bonds physically or in the Demat form. After listing, this bond investors can also buy it from both the exchanges NSE and BSE as all the bonds are tradable on both Exchanges.

What is your outlook on gold and how do you expect gold to perform in Samvat 2078?

The new Samvat 2078 is around the corner and is named Rakshasa. Analysts are still positive on gold as it is now seen to be recovering and expected to gain to key psychological levels. As of now, the bullion metal is most undervalued among the financial asset categories and may move up to its lifetime high by end of this year. With the weakness in the US dollar, no sign of an increase in interest rates and demand for physical gold due to fast approaching festival season in India, the yellow metal may breach its previous lifetime high of Rs 56,191 on the MCX. 

The average import of gold in the last 3 years has been around 190 tons in the festive season. This time it has been estimated by experts that gold imports can reach 200 tons in the festive season. 

In the international market, gold is trading on the COMEX at $1,795, which is 4.30 percent lower than the previous year's price. MCX Gold is also trading at the level of Rs 48,000 with a fall of 5%. 

Looking at the demand for gold in the coming time, it is being speculated that in the coming year, with the rise in the price of gold, it can touch the level of Rs 50,000.

Should investors also look at buying silver and add to their portfolio as the bullion prices are trading near 50K?

Silver is outperforming gold now, with demand mainly coming from the industry. The base metals - copper, aluminium, zinc, nickel, lead are all near lifetime high due to supply issues from China and with production reducing, this will affect the silver prices also. The rally was started from the level of Rs 58,000 and is expected to continue in the short to midterm. Investors can buy from current levels, however, they have to purchase 50% at this level and can add more once some retracement comes at the price. This rally is likely to end near the price of Rs 70,000 –72000. We may expect prices to shoot up toward Rs 80000 towards the year-end.

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