Is this the right time to buy gold, given the price correction?

Advisors bet on the metal for its safe-haven status and hedge against inflation

The corrections in both global and domestic markets offer an enormous opportunity for investors to accumulate gold in their portfolio this festive season before a possible rebound in its prices following strong fundamentals.

While the geo-political tensions between the United States and North Korea continue to escalate, with both sides launching verbal attacks and counter attacks on each other, gold's inherent nature being a safe haven bet and a hedge against inflation continues to be a good investment avenue against all odds. The current price, therefore, is lucrative to park funds in gold, feel investment advisors.

"The current price correction offers an opportunity for investors and individual consumers to buy gold ahead of a possible rally based on strong fundamentals. In fact, the downside is very limited in gold. Prices are expected to rebound from the current level," said Gnanasekhar Thiagarajan, Director, Commtrendz, a city-based equity trading and research analytics firm.

While the ongoing geo-political tensions between the United States and North Korea does not seem to be receding, mounting fears of rise in inflation in India offer room for a sudden spurt in gold prices. The weak payroll data presented by the US government on Friday certifies analysts' belief for an increase in gold prices.

The US Labour Department on Friday reported that the economy lost 33,000 jobs in September while the unemployment rate fell to a new post-crisis low of 4.2 per cent.

This is the first negative print for headline payroll gains since September 2010 while the unemployment rate is now at its lowest level since February 2001. Friday's report also broke a 90-month streak of private sector job growth. Economists had expected that nonfarm payrolls would grow by 80,000 during the month with the unemployment rate expected to remain steady at 4.4 per cent.

After hitting a recent high of $1,350 an oz, gold slumped to trade at $1,265 an oz due to a strengthening dollar against major global currencies and traders' short-term pull back to take advantage of rallying equity markets. Experts however believe that the decline is overdone.

Standard gold in Mumbai's popular Zaveri Bazaar here slumped by over 3 per cent from its recent peak of Rs 30,500 per 10 grams to trade currently at Rs 29,550 per 10 grams.

"Fundamentals for gold continued to remain supportive. So, the current price decline is in fact a good opportunity for investors to book gold before its price starts moving up," Jayant Manglik, President, Religare Securities Ltd.

Meanwhile, experts estimate depreciation in the rupee against the dollar due to increase in overall headline inflation in India as anticipated by the Reserve Bank of India in its latest quarterly monetary policy. Any depreciation in the rupee would make imported commodity costlier in local currency. Thus gold would become costlier going forward. Apart from global factors, gold prices remain elevated during the Diwali festival which is considered auspicious to buy a piece of gold.

"Indian buyers were waiting for relaxation in the cash purchase limit under the goods and services tax (GST) which the government announced at Rs 50,000 under the Prevention of Money Laundering Act (PMLA). Since the GST council rescinded it's August notification, the cash purchase limit has gone back to its earlier level of Rs 200,000. Now, consumers would rush to buy gold. So we advise our customers to buy gold now before its price shots up,"said Kumar Jain, Director, Umedmal Tilokichand Zaveri, a bullion dealer and jewellery retailer in Zaveri Bazaar here.

Today, gold offers twin benefits to accumulate in investment portfolio ahead of Diwali festival - price decline despite strong fundamentals and huge discounts in making charges by jewellers. Many jewellers have started offering a massive discount to the tune of upto 50 per cent to attract customers. TBZ has announced a fix making charge of Rs 199/gram for goldjewellery and nil for diamond jewellery.

"We were waiting for a positive news. With the GST council exempted PMLA extension on jewellery, we see a revival in consumer sentiment. Now jewellery sale would jump significantly this festive Diwali season," said Jain.

Meanwhile, gold yielded negative returns so far this Samvat year with its price on Diwali 2016 was hovering at Rs 29,680 per 10 grams as against its current price of Rs 29,550.