Gold Prices Reach All-Time High: Is It Time to Invest More?
Gold’s Role as a Safe Haven and Wealth Creator
Gold is known as a safe investment during uncertain times. But it’s not just a safe bet; it can also create wealth. Over the past three years, gold has returned 17%, beating the Sensex’s 11.6% return.
Why Are Gold Prices Rising?
- Trade disputes, a weaker dollar, and inflation fears have made gold more attractive as a safe haven.
- Possible gold import tariffs have moved gold towards US markets.
- Central banks have bought more gold in the last three years than in the previous six.
- Gold ETFs have grown significantly, with $9.4 billion (100 tonnes) added in February, the highest since March 2022.
- Central banks’ monetary policies, especially after the 2008 Global Financial Crisis, have added liquidity, weakened currencies, and increased inflation concerns, boosting gold’s value.
Gold Outlook: Will the Rally Continue?
Experts believe that gold’s upward trend could slow as diplomatic talks stabilize markets and inflation remains under control. The current risk-reward profile for gold appears unfavorable, with analysts suggesting it’s overvalued.
Long-Term Gold Outlook
“Central banks’ policies will likely have a significant impact on the gold market in the long run,” says Chirag Mehta, CIO of Quantum AMC. “Given recent developments, central banks may ease monetary policies further, potentially moving away from relying on a dominant currency. This shift could benefit gold.”
Gold Performance: A Country-by-Country Analysis
Historical data shows that gold investments have outperformed stocks in both developed and emerging economies over the past 25 years, except in India, where equities have slightly outperformed gold.
What Should Investors Do?
Experts recommend including gold in a diversified investment portfolio. While it’s traditionally seen as a safe haven, gold’s importance goes beyond diversification. However, investors should be cautious about recent performance and avoid over-allocating to gold.
