International gold prices have been rallying but may fall if the war situation between Russia and Ukraine normalises, Emkay Wealth Management said in a report.
Except for the UK, the interest rates in the rest of Europe have not been hiked so far, and it is felt that it may be delayed," the wealth management firm said.
Gold rates in the global markets have been surging sharply since the end of February and reached near their all-time high levels in March. The precious metal has become a safe haven for investors again uncertainties in the global scenario.
Further, the aggressive stance by the US Fed is likely to cause some problems as US Dollar yields rise and the currency strengthens. The prices of commodities quoted in US Dollars is likely to gradually ease. This trend could also accelerate with the war clouds subsiding in Eastern Europe if negotiations meet with some success, it added.
The gold rates and the US Dollar index are generally inversely proportional, but in the war situation, both gold and the US dollar index have risen consistently.
The report also mentioned that gold traded higher to $2,070 after the breakout of the war. However, with the war situation easing a bit, gold prices have come down to $1,923.
"From the range of $1,760 to $1,860, where it stayed for almost six months, the breakout to higher levels happened as inflationary expectations went up in almost all major economies," noted the report.
Inflation touched 40-year highs in the US, followed by the UK and Europe. Price level pressures emerged in India too. This development kindled the demand for gold. The twin factors, inflation and war, in short, helped this pick-up in gold prices, added Emkay.
Gold ETFs also received net inflows to the tune of $2 billion in February, after a pick-up in January. Both North American and European ETFs witnessed massive inflows, it added. The same trend is expected to be maintained in March too, stated Emkay.
How gold funds and ETFs have performed
|Gold ETF||AUM ( ₹Cr)||Absolute Returns (%)||CAGR Returns (%)|
|1 Month||3 Month||6 Month||1 Yr||3 Yr||5 Yr|
|HDFC Gold ETF||3,057||6.5||5.5||7.4||10.1||14.1||10.3|
|Kotak Gold ETF||2,293||6.5||5.5||7.4||10.2||14.3||10.2|
|Nippon India ETF Gold BeES||6,637||6.1||5.4||7.4||8.5||14||10.1|
|HDFC Gold Fund (G)||1,330||5||4.4||6.4||7.6||13.5||9.8|
|Kotak Gold Fund (G)||1,224||3.9||3||5||6.8||13.6||9.9|
|Nippon India Gold Savinds Fund (G)||1,449||5.1||4.2||6.4||7.8||13.5||9.5|
|Benchmark (Physical Gold)||6.7||5.8||7.9||11.1||15.1||11.1|