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Brokerage Motilal Oswal Financial Services (MOFSL) is bullish on gold! They've raised their price target for gold in India to a whopping Rs 81,000 per 10 grams. That's good news for anyone holding gold or considering buying.
It recommends "buy on dips" approach for gold, with advice to accumulate near Rs 69,000. While on COMEX, MOFSL advise accumulating around $2250 for targets towards $2650.
Why the optimism?
- Gold's on a roll: Gold prices have already climbed 14% this year in India! MOFSL sees this momentum continuing.
- Silver surprises: Silver's performance has been even more impressive with a 27% gain so far in 2024.
- Geopolitical jitters: Unrest around the world is making investors turn to safe-haven assets like gold.
- US Economy a double-edged sword: A strong US economy usually means lower gold prices, but MOFSL believes concerns about future debt could boost gold's value.
- Festive season boost: India's upcoming festive and wedding season is expected to increase gold demand domestically.
"“Geopolitical tensions have added to the risk premium for gold as concerns about debt pose long-term challenges to overall growth. The economic indicators from the US continue to show strength in the economy. Additionally, along with central bank buying, festive and wedding-related domestic demand could boost sentiment. It says that although ETF buying is struggling, investment and central bank buying are maintaining strong demand momentum," said Navneet Damani, Group Senior VP – Commodity Research at Motilal Oswal Financial Services.
Motilal Oswal's advice:
Buy on Dips: If gold prices dip, MOFSL recommends buying as they believe the price will eventually rise. Consider buying around Rs 69,000 per 10 grams.
Silver Opportunity: With its impressive price increase, silver might be another investment option to consider.
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US Rate Cuts: While earlier predictions suggested multiple US interest rate cuts this year, MOFSL now believes only two cuts might happen, potentially in September. This could further impact gold prices.
"Despite expectations for rate cuts earlier in the year, hawkish comments from Fed officials have tempered those beliefs, leading to a reduction in anticipated rate cuts from over four to approximately two for the year 2024. However, MOFSL believes that probability of a Fed rate cut has shifted gradually from March through May and June, and now to September 2024," said Motilal in a statement.
Where to invest?
There are several ways to invest in gold, each with its own advantages and disadvantages. Here's a breakdown of some popular options:
1. Physical Gold (Coins, Bars, Jewellery):
Pros: Tangible asset you can hold, good for sentimental value, considered auspicious in Indian culture.
Cons: Storage risks (theft, loss), making charges can reduce returns, resale can be inconvenient.
2. Gold Exchange Traded Funds (ETFs):
Pros: Invest in gold indirectly, eliminates storage risks, reflects gold price movements, traded on stock exchanges like shares.
Cons: No physical gold ownership, expense ratio fees, requires a Demat account.
3. Sovereign Gold Bonds (SGBs):
Pros: Issued by the government, guaranteed by the Reserve Bank of India (RBI), offers interest payments in addition to gold price appreciation, tax benefits on interest income (under certain conditions).
Cons: Lock-in period of 8 years (with exit option after 5th year), lower liquidity compared to physical gold or ETFs.
4. Digital Gold:
Pros: Invest in small denominations, convenient and secure storage, eliminates physical risks, often offered by reputable jewellers or online platforms.
Cons: Relatively new option, might have storage or redemption fees, underlying asset might not be physical gold in all cases.
The best option for you depends on your investment goals and preferences. Here are some factors to consider:
- Investment Horizon: Long-term investors might be comfortable with SGBs, while short-term investors might prefer ETFs.
- Risk Tolerance: Physical gold offers some security against inflation, while digital gold or schemes might have more risks.
- Investment Amount: Digital gold allows for smaller investments, while physical gold might require a larger initial investment.
- Convenience: ETFs and digital gold offer greater convenience compared to physical gold.
