Is it wise to buy gold before Diwali and hold till US Presidential Election results?

Gold rate today: The yellow metal is on an uptrend and has regularly climbed a new peak last week. During Friday's deals, the MCX gold rate hit a new record high of ₹77,839 per 10 gm, whereas the spot gold price touched a new peak of $2,722 per troy ounce.

According to commodity market experts, this gold price rally is driven by geopolitical uncertainty, potential further interest rate cuts, and the looming US Presidential election. They said the uncertainty will continue until US Presidential poll results are out. In contrast, demand for physical gold in the domestic market is expected to surge due to the fast approaching Diwali 2024. So, it becomes tricky for gold investors to time the profit-booking in their respective gold positions.

Why is gold price skyrocketing?

On triggers that are fueling gold rates today, Sugandha Sachdeva, Founder of SS WealthStreet, said, "Gold prices have skyrocketed to another record high, reaching $2,722 per ounce in international markets and ₹77,839 per 10 gm at the domestic markets, driven by geopolitical uncertainty, potential further interest rate cuts, and the looming US Presidential election. Given current trends and upcoming events that could impact gold prices, the question of whether it's wise to buy gold before Diwali 2024 and hold until after the US Presidential election is timely."

Should you buy gold before Diwali 2024?

Colin Shah, MD of Kama Jewelry, advised investors to buy gold before Diwali 2024. Gold holds a sentimental and cultural value in India. Therefore, buying gold is considered auspicious during festivals, especially during Dhanteras. This makes India the second largest consumer of gold in the world, after China. During Dhanteras, the demand for the yellow metal usually remains high. Gold prices are trending higher for many reasons, from geopolitical tensions to easing rates."

US Presidential Elections 2024 in focus

Pointing towards the US Presidential elections 2024 following Diwali 2024, Colin Shah said, “Since we are just weeks away from the US Presidential election, gold prices may witness some volatility. More than the elections, the Fed's rate cut decision will follow post-elections, which can impact gold prices. Besides input for jewellery and asset class, gold is a safe haven for investors during times of uncertainty. It is a hedge for investors against any uncertainty and price volatility.”

Triggers for gold rates today

On triggers that may dictate gold prices in the near term, Sugandha Sachdeva of SS WealthStreet listed the following five factors:

1] Geopolitical Uncertainty and Safe-Haven Demand: Heightened geopolitical tensions, particularly in the Middle East, continue to boost the appeal of gold as a haven. The possibility of an escalation in the Israel-Iran conflict adds a layer of risk to global markets, prompting investors to seek refuge in gold.

2] US Fed rate cut: Inflation in the US has been cooling, as reflected by the recent CPI data, which showed inflation rose slightly more than anticipated, yet the annual increase was at the slowest pace since February 2021. This fuels expectations of additional rate cuts from the Fed in November and December. Lower borrowing costs make gold more attractive as a non-yielding asset.

3] US Presidential Elections: The upcoming US election introduces further uncertainty, especially with rising prospects of a Trump victory. This could lead to fiscal policy changes, tariff implementations, and shifts in monetary policy, creating market volatility. Historically, gold performs well in political uncertainty, making it a good hedge leading up to the election.

4] Global Monetary Easing: The European Central Bank has cut interest rates for the third time this year, continuing the global trend of monetary easing. This policy shift by major central banks is supporting the broader upward trend in gold prices.

5] Diwali 2024: Global gold ETFs have seen strong inflows, with YTD net flows turning positive at $389 million. On the domestic front, India's festive season, particularly Diwali, typically drives increased gold purchases, which could further support prices in the near term.

On whether one should buy gold before Diwali 2024 and hold till the US Presidential elections, Sugandha Sachdeva said, "Given these factors, buying gold before Diwali could prove to be a smart strategy, especially with the expected surge in demand during the festive season. Additionally, holding until the US election results may allow investors to capitalize on further price appreciation driven by election-related uncertainty and possible policy shifts." She said a well-timed exit post-election could be prudent to lock in gains from this anticipated uptrend.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.