The festive season has been auspicious for gold investors, with the precious metal giving a return of 7 per cent in the month of October 2023.
In October, the price of gold went up by 6.8 per cent, reaching a record high of $1,997 per ounce. This is the highest daily close since May 2023 and record monthly close at the London Bullion Market Association, according to a report by the World Gold Council.
In fact, gold prices closed at a month-end high for all major currencies, except for the Swiss franc. This was a rebound from the sharp sell-off experienced at the end of September 2023 and the rebound was due to various reasons, including global tensions and actions by central banks, the report said.
The WGC report also highlighted the current COMEX net shorts reversals that we are seeing. It has historically been a positive signal for gold prices, and has led to increased ETF flows. COMEX is the primary futures and options market for trading various metals, including gold.
However WGC said that for a sustained rally in gold prices, three conditions have to be met. They are continuation or escalation of political tensions, a peak in bond yields and the dollar, or an equity bear market combined with revived recession risks.
According to the report, as on October 31, 2023, the price for 10 grams of gold in was Rs. 53,452, indicating a 7 per cent return. The year-to-date returns stood at 10.8 per cent.
Starting from Rs. 5,139 per gram in August 8, 2023, the price of gold had reached Rs. 5,272 as on November 8, 2023, according to the WGC Gold spot price. Notably, the price experienced a minor dip of Rs. 20 per gram over the last three days.
There was also an increase in the popularity of gold investment options, such as Gold exchange-traded funds (ETFs), according to data from the Association of Mutual Funds in India (Amfi). In September 2023, the number of investor accounts in gold ETFs increased by nearly 11,000, reaching a total of 4.80 million. ETFs are one among many ways to invest in gold without physically owning it, but it needs one to have a dematerialised account. Another way to own gold without a dematerialised account is gold fund.
The next option is sovereign gold bonds. SGBs delivered an annual return of 17.35 per cent, in addition to 2.5 per cent per annum, according to data from the Reserve Bank of India (RBI).
Gold and stock markets often move in opposite directions. At present, global equity market is not doing great with the Nasdaq index down more than 10 per cent from its mid-year peak. A greater than 20 per cent drop from the peak — a ‘bear market’ - could spur additional interest in gold from investors, the WGC report further said.