As Dhanteras approaches, gold buying picks up pace, and this year the yellow metal is shining even brighter. Hovering near all-time highs, gold has been one of the best-performing asset classes since last Diwali, with domestic prices delivering a substantial 32 per cent return compared to the S&P BSE Sensex's 25 per cent. Amid global economic and geopolitical tensions, gold’s performance has been remarkable, reinforcing its reputation as a safe-haven asset. Meanwhile, From the previous Dhanteras to this one, silver has yielded a return exceeding 35 per cent. Both metals have outperformed most other asset classes this year.

“Gold has outpaced other asset classes this year, making it an extraordinary year for it. Despite the current surge in gold prices, we are expecting that investing in gold will reap benefits in the future, and it still has the ability to provide attractive returns. Geopolitical and economic uncertainties, significant global ETF inflows, dovish monetary policy by western central bankers, the US election, and a lower dollar index continue to support the bullish trend in gold,” Axis Securities said.

Silver is also looking bullish. “Stable supply and growing demand have led to an upward trend in silver prices, which can continue in the long run. The market expects a fourth consecutive year of structural market deficits in 2024 due to the massive outstripping of silver demand over supply,” it added.

Gold’s Performance & Contributing Factors

Since the beginning of the year, gold has surged by 24 per cent, reaching new highs in both domestic and international markets. Over the last five years, its compound annual growth rate (CAGR) has been an impressive 15 per cent. While economic volatility and geopolitical tensions have pushed investors toward gold, other key drivers include a potential shift towards dovish monetary policies, weakness in the dollar, and geopolitical concerns that continue to loom large.

According to a recent bullion study by Ventura Securities, gold has emerged as a hedge not only against inflation but also against economic sanctions from the United States. “Although inflation has moderated, gold continues to rise, reflecting its status as a store of value. However, short-term growth in gold prices may slow due to the anticipated gradual pace of interest rate cuts,” it said. Ventura Securities also noted that while some profit-taking could occur in the short term, gold’s long-term trajectory remains bullish.

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Technical Outlook & Price Predictions for Gold, Silver

GOLD

Ventura: For investors eyeing technical opportunities, the coming period could present substantial gains, stated Ventura. In the MCX futures market, a "buy on dips" strategy could be beneficial. Gold prices are projected to rise to ₹79,000-85,700 per 10 grams, with key support around ₹77,000. In the international Comex market, gold targets could range from $2,760 to $3,000 per ounce, with a support level at $2,650, suggested the brokerage.

Axis: Buy gold around ₹75,500–76,000 and add on dips in the ₹73,500–73,700 range for the upside objective of ₹85,300–87,000 till the next Dhanteras; keep the stop loss at ₹71,500.

SILVER

Ventura: Silver, too, has a promising outlook. Domestic prices may climb to ₹106,000-120,000 per kilogram, with support at ₹95,500. In the global market, silver could reach between $35 and $40 per ounce, with support around $32.90.

Axis: The MCX Silver near-month future surpassed the previous peak and is trading at a fresh all-time high. This leads to more gains, possibly approaching the ₹1,06,000 and ₹1,09,950 levels. Buy silver mini near-month futures around ₹95,000-95,500, add on the dip around ₹92,000-92,500 for the upside objective of ₹1,03,500/1,06,000/1,09,950, and keep your stop loss at ₹88,000.

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Historical Performance: Gold’s Steady Appreciation

Gold has consistently demonstrated resilience. Back in 2014, gold traded at around ₹27,000 or $1,200 per ounce, marking a steady appreciation with a CAGR of around 7-9 per cent. The recent surge is underscored by the broader bullish trend, with gold gaining 34 per cent year-to-date. This trend may continue, driven by Treasury yields, a stronger dollar, and upcoming Federal Reserve policy announcements that could further fuel bullion demand.

Ventura also informed that Sovereign Gold Bonds (SGBs) are currently trading at a premium, reflecting the additional 2.5 per cent annual interest they offer alongside market price gains. However, liquidity issues remain a concern for investors seeking quick entry or exit. Exchange-traded funds (ETFs) or gold mutual funds may offer higher liquidity, although they lack the 2.5 per cent interest that SGBs provide, it said.

Role of Gold as an Asset Allocator

According to Ventura, gold remains an essential part of a balanced portfolio, serving as a hedge against stock market volatility and global uncertainty. While gold does not always promise extraordinary returns, its importance in diversifying an investment portfolio has been consistently proven. Historically, gold has compensated during periods of weak or negative equity returns, demonstrating its role as a stabilising force in portfolios. A tactical allocation of around 10-12 per cent in gold, regardless of market prices, can add resilience to a portfolio, advised the brokerage.

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Investors may consider different investment avenues like gold ETFs, SGBs, physical gold, or even gold futures, depending on their goals and liquidity needs. Additionally, silver is another potential asset to consider for diversification. Investors should adjust allocations based on market trends and personal risk tolerance, aiming for long-term financial stability, it said.

As we step into Samvat 2081, gold remains a key asset for protecting wealth amid global uncertainties. With its track record of steady returns and ability to counterbalance equity volatility, gold will likely continue to attract investors. The bullish outlook for gold, supported by favourable macroeconomic conditions and investor demand, makes it a prudent choice for long-term asset allocation. Whether as a hedge or for diversification, gold is poised to remain a valuable addition to portfolios in the year ahead.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.