- March 5, 2022
- Posted by: Author
- Category: Blog
I recommend increasing Gold Investments into the Portfolio.
The moment Air strikes happened in Ukraine we have noticed how Financial Markets took a hit.
The Sensex took one of the 10 worst recorded intra days falls in history. Investors got panic and presses the Exit button. At the same time, Gold price rallied to 1 year high Mark @ Rs 53000 per 10 grams.
What we noticed till now :
Gold prices and Stock Markets Movements are generally Inversely proportional to each other. When Stock Markets moves downside, Gold prices generally increase and vice-versa.
if we look at History, During the 2008 Global Financial Crisis(Lehman collapse etc), Gold prices grew by 26% while Sensex fell above 50%.
Even During the covid crisis in 2020, the Gold price rose up to Rs 56,000 per 10 grams. But when Equity Markets recovered, Gold prices corrected about 20%
How to judge the outlook for Gold: In a current scenario (Ukrain -Russia war) if we want to understand the outlook, we need to analyze the current economical and political environment for a clear picture on short-term.
The following factors will influence the price of Gold for the short term.
Geopolitical tension: If the current situation continues then there will be a slow down in economic growth and it will increase the prices of Gold
Crude oil prices: we have seen crude touching an 8-year high at $130 per Barrel due to supply disruption from Russia. This will increase Inflation.
Currency( INR): Higher crude oil prices will impact the Fiscal Deficit and this will put pressure on Rupee as a result, we can see an increase in Gold price
Inflation: Due to sanctions on Russia there shall be a disturbance in Global trade and supply chain. This will increase the Raw material prices and commodities will be on Rising. This in turn leads to rising in inflation.
At this time Gold is the best bet as generally Gold prices rise in tandem with inflation rates.
Global Factors will play a key role in Gold prices.
One should also take into consideration that the Federal Reserve of US FED’s policy allows an increase in Interest rate in near future and that will moderate the speed of the Gold.
My Invest Mantra: one has to invest for Long term benefit and should also trade to make use of short term Trends. Not necessary a Daily trade.
One can even enter into Monthly contracts in commodities to reap the benefits of short term trends.
The Economics are becoming Dynamic and we also need to be Dynamic while Investing to get superior returns.
Kiran Reddy, MD, Ticker Qube