Should you buy or hold gold as prices soar above Rs 70,000/10 gm?

Srinagar, Apr 5: Gold prices continued their relentless rally, surging above the $2,300 per ounce mark on April 4, posting record highs for the eighth consecutive day. The precious metal's surge was fueled by expectations that the US Federal Reserve will cut interest rates in 2024 and sustained robust demand from central banks worldwide.

The yellow metal touched a peak of $2,304.96 an ounce after Fed Chair Jerome Powell signaled on April 3 that it would be appropriate to reduce borrowing costs "at some point this year."

In India, gold prices hit a new all-time high of Rs 70,248 per 10 grams, significantly higher than the Rs 56,000 to Rs 57,000 range seen during the same period last year.

Geopolitical tensions in Ukraine and the Middle East, coupled with record gold purchases by global central banks, have provided strong tailwinds for the precious metal's rally. According to the World Gold Council, central banks bought a record 1,136 tons of gold in 2022, followed by 1,037 tons in 2023. This trend is expected to continue in the first quarter of 2024, with China dominating purchases in Asia. The Reserve Bank of India's gold reserves currently stand at 817 tons.

The unprecedented surge in gold prices has left market experts puzzled, with many speculating that the rally could be driven by buying in paper gold markets, where physical gold backing is not mandatory, unlike in India's gold ETFs. Gold's global market capitalization is estimated at a massive $15.57 trillion, making market manipulation challenging.

Major financial institutions like Citi Group and JPMorgan have set bullish targets for gold, with predictions ranging from $2,300 to $2,500 per ounce by the end of 2024.

While the gold targets set for the end of this year have already been achieved in April 2024, experts believe prices could remain firm until the second half of 2025 before a potential correction.

In India, investors typically hold physical gold for the long term as a portfolio diversifier, and many are expected to continue holding their positions while awaiting further upside. However, trading gold on the short side remains risky amid the current sustainable momentum.

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