Mumbai: Those who doubt return from Gold investments may have to re-evaluate their investment strategies for 2020.
Data analyzed by Sify.com until the last few trading hours of 2019 shows the yellow metal rose by 23 percent or an approximate two percent every month on an average in 2019.
Rates on 1st Jan 2019 were reported at Rs 31650 per tola or ten grams. Gold rate per ten grams on the last session of the last day of 2019 were reported at Rs 38978.
For laymen, an investment of Rs 1 lakh in Gold at the start of 2019 could have fetched Rs 1,23,000 by the start of the New Year.
The Gold bull-run this year is significantly higher than past several years. This is the first time in at least nine years that Gold has offered over twenty percent gains. In 2010, Gold rates were reported to have soared by 29 percent annually.
Gold as an investment class certainly seems to have had a great year, better than equities. Although equity investments have seen some infusion, the thirty scrip sensitive BSE Sensex scaled only 13 percent in 2019. The Sensex skiddled by 304 points on the last trading day of 2019.
Uncertain Trade equations, Dollar projections, hi-demand for jewellery and more special days to buy Gold in 2019 could be some of the reasons. There has also been a scramble among central banks to invest more in the Yellow metal.
The demand itself was dizzying through the year. For instance, India's love for Gold shattered all insanity levels during Akshaya Tritiya when the industry claimed a whopping 23 tonnes of Gold sold in May 2019. Indian Bullion and Jewellers Association later clarified saying that sales had breached 30 tonnes.
The demand was so much that even during Pitru Paksha in September, an inauspicious fortnight to buy the Yellow metal according to Hindu belief, Gold rates were pegged at Rs 36,700, far lower than the opening on January.
Gold rates touched an all-time high during J&K tensions quoting Rs 37,347 per 10 grams.
In August, slow-down and global economic scenario pushed Gold upwards of Rs 40,000 per tola. Silver prices too crossed the Rs 49,050 per kilo mark.
In the last trading week of Gold, prices have pushed up by at least a good Rs 1,200 per tola and there is a likelihood that the rates could head-up given how slow economic growth has contributed to hoarding of the yellow metal in recent times.
Chirag Mehta, a Senior Fund Manager for Alternative Investments at Quantum AMC explains, "Since scaling to highs of $1900 in August 2011, gold prices have trended downwards touching lows of $1000 in 2015. But just when investors had started discounting the history, and economics of holding this precious metal, it delivered stellar returns and made a comeback as a mainstream asset in 2019."
"Prices touched highs of $1550 levels in September on the back of trade war tensions. Further developments on this front kept prices volatile and range bound $1450-$1500. Other factors that influenced prices were the global low-growth disinflationary environment, Fed’s policy U-turn, recession fears, negative interest rates and threat of currency wars. 2019 returns from gold stand at +14.2%. Gold’s rally was thus fueled by an array of mutually reinforcing factors - trade war, slowing growth and Central bank dovishness - sapping the appetite for risk assets"
Mehta is confident of Gold continuing its positive trend, saying "We suggest an allocation of between 10-15% of one's portfolio. We suggest that investors use any corrections as an opportunity to add more gold to their portfolio or ideally keep allocating to gold in a systematic manner."
Ravindra Rao, VP-Head Commodity Research at Kotak Securities avers, "Gold's sharp rise in 2019 was coupled with a sharp rise in ETF holdings. However, the funds began to exit as price turned range bound and as global risks subsided. Gold holdings with global funds rose to about 2559.6 tonnes, highest since February 2013, but has retreated in the last quarter of 2019. For the year, global funds have seen a net inflow of about 300 tonnes, more than half of which has happened in July-August period. (Source-Bloomberg). With persisting global risks, we believe that investors may be willing to remain invested in gold however inflows may pick up pace only if there are new factors which could push price back above the key $1560/Oz."
Some of the key factors, experts suggest to watch out in 2020 are as follows:
• Central Bank buying
• Weakness in Dollar Index
• Political uncertainty in US due to elections
• Surging global debt
• Domestic factor: Indian demand scenario
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