Despite volatility, gold gave double-digit returns in 2022

The yellow metal kickstarted the year at around Rs 48,000 levels and touched a high of Rs 55,000 in March on the back of a geopolitical crisis led by the Russia-Ukraine war.

However, after a major consolidation, the bullion saw some buying interest and marched towards 54,000 levels at the fag-end of the year.

Nitin Thard, Director, SafeGold, said that gold witnessed a big rally of about 10% in November, considering the less aggressive US Fed. This helped gold rise over 12% on a year-to-date basis.

“The recent hike in the import duty of 5% by the Indian government to control the CAD increased the value of gold in the Indian domestic market, also one of the major factors contributing toward the positive return,” he added.

Slower rate hikes by the Fed are seen as positive for non-yielding gold. Though, for the ongoing calendar, the ‘hedge against inflation’ status of gold was much in debate.

Ketan Kothari, Director, Augmont Gold, said that in the domestic markets, gold prices have jumped sharply following the depreciation of the Indian currency against the US dollar. “The prices in international markets have not moved on similar lines.”
Market participants believe that the two major factors — the war between Russia and Ukraine with interest rate hikes by central banks to tame inflation, drove the gold prices in the year 2022.

Thard, Director, SafeGold, said that two major factors affected the gold price, including Russia’s invasion of Ukraine, which affected the fresh physical demand for gold in the domestic market during the first half of 2022.

This, followed by five consecutive interest rate hikes by the US Federal Reserve, dragged the gold price to lows and boosted the buying sentiment among retail investors, he added.

Adding more, Rajesh Shet, Co-Founder and CEO, SahiBandhu, said that the prevalence of economic shocks, a sharp decline in stocks and commodity prices, and geopolitical tensions have become concerns for great uncertainty.

The rising inflation and a growth slowdown in major economies indicate a bullish trend for the yellow metal in the long run, instead of short-term gold price corrections due to profit-booking by traders, he added.

Market participants believe that gold price volatility may continue due to global uncertainty and interest rate hikes; investors should keep adding gold to their portfolios in a systematic way.

They suggest that the yellow metal is a much-needed component for portfolio diversification, and the best way to stay invested in gold is through SIP every month for better returns.

Gold has been giving an average of 11% CAGR returns for the last 25 years, said Kothari from Augmont. “Whenever prices dip for a certain reason, it is always an opportunity to buy for long-term returns.”

The most important aspect that investors should remember is that gold helps you to hedge against inflation, they said. Investors should include at least 5% of gold investments in their portfolio, he added.

Less volatility, coupled with the availability of multiple investment options in the form of digital gold, ETFs, and Sovereign Gold Bonds make gold investments a highly attractive option, said Shet from SahiBandhu.

“SGBs can allow investors to enjoy complete long-term capital gains, exempted from tax, given that the investment is held till maturity,” he added. “Most of these instruments also have high liquidity along with safety and reliability.”

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)