As Rupee Showing Signs of Weakness, Is It Right Time To Invest In Gold?

Is It Right Time To Buy Gold? Gold helps your investment portfolio diversify, which reduces volatility and limits losses, apart from enhancing returns. Financial advisors advise keeping a portion of the investment portfolio in gold, as it mitigates losses during downtrends in equity. Experts said that with the rupee currently showing signs of weakness against the dollar and the festive season in India just around the corner, investors should consider capitalising on the positive trend in gold.

Jateen Trivedi, vice-president (research) at LKP Securities, said, “The robust festive demand in India is poised to maintain stable gold prices. For investors seeking to accumulate gold, a strategic entry point lies between the current levels of Rs 58,500 and Rs 57,000.”

With the rupee showing signs of weakness against the dollar and the festive season in India just around the corner, investors should consider capitalising on the positive trend in gold, he said.

On Wednesday, August 23, the price of 24-carat gold in India was up by Rs 100 to Rs 59,230 per 10 grams, against Rs 59,130 on Tuesday.

The rupee last week fell to its all-time low of 83.1 against the dollar. On Tuesday this week, the rupee recovered from its all-time low levels and settled higher by 14 paise at 82.99 against the US dollar. A weaker rupee increases the price of gold.

India is one of the largest gold consumers in the world.

Trivedi said, “Given the ongoing trend of global central banks acquiring gold and the uncertain global economic landscape, gold prices are anticipated to remain steady, if not rise significantly due to the impact of a stronger dollar and elevated interest rates. However, the trajectory could swiftly change. The moment the US Federal Reserve hints at a potential pause in its rate hikes or even the possibility of an interest rate cut, gold prices are likely to surge.”

Taking these factors into account, investors can reasonably project an optimistic outlook for gold, foreseeing price levels in the range of Rs 61,000 to Rs 62,000 by the close of the year. “It’s a strategic move that aligns with both the weakening rupee and the traditional buoyancy of the festive season in India,” he said.

In the past 5 years since July 2018, gold has jumped 99 per cent. The Sensex, on the other hand, has risen just 77 per cent during the period. During this period, the rupee was down 31 per cent from 63 per dollar in 2017 to 82 per dollar.”

According to experts, the reasons for gold outperforming the Sensex were weak economic prospects, supply chain uncertainty during the pandemic, geopolitical tensions, central banks buying gold to boost reserves, and dollar uncertainty.

“There is still an uncertainty in the market. Economic indicators show China is weakening. It favours gold prices. Investors can consider keeping around 20 per cent of the investment portfolio in gold,” according to Jateen Trivedi.