Gold prices near ₹72,000 per 10 grams on Akshaya Tritiya day: Will high rates deter demand?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Gold prices soared on the Multi Commodity Exchange (MCX) on the day of Akshaya Tritiya, an occasion when buying the yellow metal is considered auspicious. On Friday, May 10, 2024, gold futures maturing on June 5, 2024, reached ₹72,094 per 10 grams on the MCX.

This was ₹455 or 0.64% up from the previous close at ₹71,639 per 10 grams.

The surge in gold prices isn’t confined to domestic markets alone; globally, gold prices also witnessed an upward trend.

Spot gold climbed 0.2% to $2,350.87 per ounce by 0212 GMT, buoyed by recent economic data hinting at a potential interest rate cut from the Federal Reserve.

This momentum propelled gold towards its best week since April 5, with prices up by 2.2% so far this week, according to news agency Reuters.

US futures mirrored this trajectory, rising 0.7% to $2,356.90.

Tapan Patel, Fund Manager-Commodities at Tata Asset Management, suggests that the current market landscape, coupled with the auspicious day of Akshaya Tritiya, presents a favourable environment for gold investment.

Factors such as central bank gold purchases, expectations of interest rate cuts, and geopolitical risks contribute to the bullish sentiment surrounding gold prices.

Patel advises investors to consider allocating around 8-10% of their total portfolio exposure to gold as a strategic move for asset diversification.

Recognizing gold’s role as a diversification tool, hedge against inflation, and long-term store of value, Kavitha Subramanian, Co-founder of Upstox outlines various investment vehicles available to investors except from physical gold:

Sovereign Gold Bonds (SGBs)

Backed by the RBI and the GOI, SGBs offer a secure alternative to physical gold, with an assured interest rate of 2.5% annually and tax-free profits on maturity.

Gold ETFs

These instruments provide a convenient and cost-effective means of investing in gold, suitable for investors seeking exposure to gold without the burden of physical ownership.

Gold Mutual Funds

Managed by professionals, gold mutual funds invest in physical gold, Gold ETFs, or gold mining company stocks, catering to diverse investor preferences.

Asset management companies (AMCs) are increasingly offering innovative avenues for gold investment, ranging from hybrid multi-asset schemes to exchange-traded commodity derivatives (ETCD).

Subramanian recommends allocating approximately 5% to 10% of one’s portfolio towards gold to optimise diversification and manage risk effectively.

Gold sales on Akshaya Tritiya day

Colin Shah, MD at Kama Jewelry, said that a twofold momentum surge is expected this year during Akshaya Tritiya.

He attributed it to the sentimental value attached to gold and the auspicious timing for investments.

According to Piyush Gupta, Director at PP Jewellers by Pawan Gupta, gold sales may range between 10-15% this year.

“Even if gold prices this year may be increasing at a fast pace, it’s important to see the bright side of things. It is also important to understand that the rise in prices reflects not only market conditions but also the true worth of gold as a tangible asset with enduring value,” he said.

Harshal Barot, Senior Consultant for South Asia and the Middle East at Metals Focus expects gold sales volumes to be 10-20% lower this Akshaya Tritiya compared to last year.

However, in terms of value, he said that sales will remain comparable.

Barot said prices have cooled off from record highs, boosting sentiment in the run-up to Akshaya Tritiya.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow