This Diwali season, buying gold might be more than a traditional purchase — it could be a wise investment choice for the future. Gold prices are expected to rise due to several global and local economic factors, with experts predicting a potential increase to Rs 86,000 per 10 grams. Here’s why investing in gold this Diwali could be rewarding.
7 Key Reasons Behind Rising Gold Prices
Gold has already seen a strong upward trend in 2024, with prices surging about 24% year-to-date. According to analysts at Religare Broking, several factors are contributing to this rally, making gold an attractive option for investors.
- Geopolitical Tensions:
Heightened geopolitical uncertainty, especially in the Middle East, has increased global demand for gold as a safe-haven asset. When global markets face tension, investors often turn to gold to protect their portfolios, adding pressure on prices to rise. - Weak Rupee Against Strong Dollar:
The ongoing weakness of the rupee against the dollar is also pushing gold prices up. Since gold is priced in dollars, a strong dollar makes gold costlier for Indian buyers, encouraging investors to purchase before prices rise further. - Central Banks Buying Gold:
Central banks worldwide are increasing their gold reserves, which strengthens prices due to rising demand. This trend is likely to continue as banks look for assets that can offer stability amid currency fluctuations. - Inflation Concerns:
High inflation rates have a direct impact on gold prices. As inflation rises, gold serves as a hedge, offering a store of value. Many investors are now looking to gold to preserve their wealth, further boosting demand. - Rising Investment Demand:
Investment in gold is picking up momentum due to its strong recent performance. With gold offering good returns this year, retail and institutional investors alike are expected to maintain or increase their holdings, contributing to the price rise. - Physical Gold Demand:
With the festive season underway, physical demand for gold in India is growing. Diwali and Dhanteras are traditionally strong periods for gold buying, and this demand is likely to keep prices buoyant. - Possible Interest Rate Cuts:
As the global economic environment faces slowdown risks, central banks might cut interest rates, a move that typically makes gold more attractive to investors. Lower interest rates mean lower returns on cash and fixed-income investments, pushing people towards gold.
Technical Insights: Gold’s Future Movement
Ajit Mishra, Senior VP at Religare Broking, points out that gold’s upward trend since the start of 2024 has placed it at a technical high, with indicators suggesting that prices could face resistance around Rs 79,800 per 10 grams. Mishra notes that prices may experience some short-term corrections before pushing further upward.
He also advises potential buyers to consider investing between Rs 76,500 and Rs 74,800 per 10 grams, as the first target of Rs 83,000 and a second target of Rs 86,000 per 10 grams could be achievable. However, if prices drop below Rs 72,300, they could fall back to Rs 70,000, presenting an opportunity to buy at lower levels.
Investment Tips This Diwali
For those planning to invest in gold during the festive season, these price trends and forecasts provide a positive outlook. However, like any investment, gold carries risks, and market fluctuations are possible. Consulting with an investment advisor can help investors make informed decisions.
With various economic and market factors at play, this Diwali could be an opportune time to consider gold as part of a diversified investment portfolio.
