Should you buy gold ahead of festive season, wedding demand?

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Gold prices hit the lowest in the last four months at the starting of this week. The yellow metal price hovered around Rs 46,000-46,500-range, almost Rs 10,000 down from the all-time throughout the week. The decline was largely due to improved US employment data and stronger US dollar, as per market experts. Spot gold prices have also dropped by around Rs 2,100 in this month so far.

However, amid the geopolitical crisis in Afghanistan and rise in Delta variant of Covid-19 cases globally, gold prices increased recently. Going forward, in India, the festive demand and wedding season is likely to further support strength in prices.

“We have noticed that gold prices again rallied in last couple of days. Geopolitical tension support the gold prices. Festival and wedding season in India is also supportive for gold prices. Investors should buy gold at the moment as prices are trading on lower levels. We are expecting that gold may test 50000 to 52000 till the year end,” Anuj Gupta, VP, Commodity & Currency Trade at IIFL said.

Is it right time to invest in the safe-haven asset?

Gold demand in the country increased by 19.2% to 76.1 tonne during the April-June quarter this year, largely due to low base effect, according to a report by the World Gold Council (WGC). In value terms, India’s gold demand witnessed 23% growth during April-June quarter at Rs 32,810 crore. Gold Investment demand in value terms went up by 10 per cent at Rs 9,060 crore during the quarter under review.

“The US Dollar could continue to remain firm in the short run as investors will move to the safe haven appeal of the greenback amid rising Covid-19 delta variant infections. So, we could witness come more correction in the short run,” opined Sriram Iyer, Senior Research Analyst at Reliance Securities.

For those who are planning to invest in the precious metal, he suggested, “In the longer we still feel there could be one more leg up for gold and investors looking for returns in the longer-term horizon can enter at current levels and keep buying at any dips.”

Tapan Patel- Senior Analyst (Commodities), HDFC Securities is of the view that Gold prices have been witnessing recovery from day’s low in wake of disappointing economic data and worries over fast-spreading Delta variant cases. The fall in US bond yields supported the bullion rally which fell to 1.23% for the day.

“We expect gold prices to trade sideways to up with COMEX spot gold resistance at $1,810 and support at $1,770 per ounce. MCX Gold October support lies at Rs 47,200 and resistance at Rs 47,700 per 10 gram”, he said.

Hallmark blues

However, experts also say India’s new purity standards for gold could choke supply in the second-biggest consumer just as demand is expected to rebound.

Jewellers may find it difficult to fulfil orders during the peak festival season starting next month, as they are facing delays in getting their goods certified under the country’s new hallmarking standards. The new rules were introduced in June and jewellers will be fined for selling non-certified goods from September.

Ashish Pethe, chairman of the All India Gem and Jewellery Domestic Council has shared his views with media on the issue and has said that the challenge is that there aren’t enough certifying centres in the country, and the rush to meet the new rules before the festival season starts has led to the process taking as many as three days from a couple of hours earlier.

A supply bottleneck could weigh on a nascent recovery in sales. Demand is also set to benefit from India’s booming stock market as buyers typically tend to invest their returns in gold during the festive season.