The persistent inflation caused the US Federal Bank to increase the repo rate every few months. Economic uncertainty has rattled the world economy causing many countries to import more gold into their treasuries. Rising prices due to stock market volatility and recent world affairs have also caused them to reassess their provisions for retirement or top up their emergency funds. Amidst all this chaos, many personal finance analysts are telling investors to turn to gold investments. Gold has traditionally been regarded as a hedge against inflation because its value rises in an uneven economy.
Many investors are asking if this is the right time to buy gold or if it is worth considering investing in the future. We realize how people come with different views based on their experiences and investing styles. So, we asked six personal finance experts if it is the right time to buy gold.
Dev Ashish, a SEBI-Registered Investment Advisor and Founder (Stable Investor) said, “Few factors seem to favour a further rise in gold prices. There seems to be a consensus supported by a reasonable probability that many developed economies will see weak growth and mild-moderate recession. Given the higher base effect, inflation is expected to gradually come down but remain at elevated levels compared to the recent past. Central banks across the globe are fighting inflation by raising interest rates. Chances are that rate hikes will slow down initially (or take a pause) and then stop in later parts of 2023."
"Financial markets themselves have been quite jittery in 2022 and are expected to remain so in 2023 as well. Geopolitics will continue to hog the limelight for some more time. Gold is increasingly becoming quite attractive for many countries’ treasury to reduce their dependence on foreign reserves. So, given these factors, some negative and others neutral for the overall global economy, it can be said that the gold price outlook for 2023 is positive. How positive, is anybody’s guess but gold should continue the uptrend into 2023,” he said.
“For the long-term investment portfolio, having 5-15 per cent exposure to gold can be considered. While five per cent or lower may be too small to have any impact on the overall portfolio, I think one shouldn’t have more than 15 per cent as well as gold is more of a portfolio hedge and not the core asset for most. If you don’t have any allocation to gold, then please don’t buy gold in one shot. Start now and gradually increase the allocation to gold in your portfolio,” Ashish added.
Pritam Patnaik, Head - Commodities, HNI & NRI Acquisitions, Axis Securities shared, “Historically gold prices have rallied at the far end of large rate hike cycles. This time too, the historical trend is expected to repeat. With a collapsing dollar index and lower bond yield, it is widely expected to see flows back to gold. Additionally, with the recent drubbing seen in crypto, flows allocated towards the same are also anticipated to flow into gold. While the USD has been the asset of choice from a safe haven standpoint in the recent past, bullion could well become the preferred option as large economies stare into a possible recession owing to high-interest rates. Thus, buying gold on every dip would be a wise strategy.”
Suman Bannerjee, CIO, Hedonova - An US-based hedge fund said, “Gold is no longer a flight-to-safety asset class. It's volatile and very susceptible to interest rate changes. Lower rates lead to higher prices and vice versa. With the Fed rates being high in 2023, gold prices will mostly fall but that's worse if the dollar index is at historic highs and a small fall in the dollar will crush gold prices in rupee terms.”
Mohammed Imran, Research Analyst, Sharekhan said, “Buoyant gold is expected to make a fresh record (previous record high $2075) high this year on the rising risk of stagflation/ recession as key central banks continue to hike rates aggressively to rein in inflation even when the economic situation continues to worsen. In addition, geopolitical concerns continue to linger due to the Russia-Ukraine war and China -Taiwan tiff. So, yes. Investors should strategically invest in gold to capitalize on the bright prospects of the yellow metal.:
Suresh Sadagopan, MD & Principal Officer, Ladder7 Wealth Planners said, “Gold is a good asset to buy when there is a lot of uncertainty and high perception of risk. This is such a time and investment in gold makes sense. An allocation of between 5-10 per cent in the portfolio is always suggested. Those who do not have such an allocation may buy gold now. However, gold should be treated as a long-term strategic asset in the portfolio rather than just a tactical allocation.”
Viral Bhatt, Founder, Money Mantra said, “Looking at the conditions which are favourable for assets like gold, geopolitical tensions, high-interest rates, weakness and volatility in the equity markets considering three-to-five-years’ horizon gold looks good.
Considering how inflation remains a persistent factor, this may be the best time to buy gold. Even if inflation cools off, it is still not expected to be lower than what it was. Investing in gold now can help consider the possibility of gold prices increasing in the future.