Image used for illustrative purposes. KT File Photo: Shihab
Should investors and jewelry consumers buy gold now or wait for a potential price drop as the yellow metal continues its relentless surge, reaching all-time highs over the past weeks? Investment analysts are split on whether now is the optimal time to invest in gold. Some experts, like John Reade, chief market strategist at the World Gold Council, believe that the current economic environment is conducive to gold investment. “With inflation rates remaining elevated and central banks worldwide adopting dovish monetary policies, gold is likely to maintain its upward trend,” Reade asserts. He advises investors to consider gold as a long-term hedge against economic uncertainty.
Leading bullion traders and precious metal analysts in Dubai foresee the possibility of gold reaching new highs and surpassing $3000 per ounce within a few months. A weaker dollar, lower bond yields, and escalating geopolitical tensions in the Middle East are driving prices to new daily highs. The upward momentum in gold prices is expected to persist, potentially exceeding $3,000 per ounce before the end of 2024, they argue.
Joy Alukkas, chairman of Alukkas Group, believes there is little likelihood of gold experiencing a sharp downturn. “Waiting for the price to drop before investing or purchasing jewelry could be a misstep, especially with the prospect of further US Fed rate cuts amid a backdrop of geopolitical tensions, including conflicts in the Middle East and the upcoming US presidential elections,” Alukkas noted. “For jewelry buyers, particularly Asian expatriates, the emotional and aesthetic value of a piece of jewelry may outweigh the potential for price fluctuations,” he added.
In the event of a price decline, it is unlikely to be substantial enough to warrant risk-taking for retail investors, as the precious metal appears poised to break new highs. Spot gold prices have reached $2,749 per ounce, with prices in the UAE rising to Dh332.75 per gram for 24-carat and Dh308.24 for 22-carat.
Some analysts warn against purchasing gold at peak prices. “While gold has traditionally been a safe investment, buying at all-time highs can be risky,” cautions Michael Widmer, a commodities analyst at Bank of America. “Investors should be prepared for potential corrections and consider dollar-cost averaging to mitigate risks.” “If you are risk-averse, waiting for a potential correction may allow you to buy at a lower price,” one analyst suggested.
Expatriates frequently purchase gold jewelry for personal use and gifting. “The emotional value attached to jewelry can outweigh fluctuations in gold prices and its investment prospects,” says U. Nagaraja Rau, strategic director of Bhima Jewellers. “Gold is a timeless investment, and its value is likely to appreciate over time.”
According to analysts, it is crucial to analyze historical gold price trends to make an informed decision. Over the past two decades, gold has undergone several significant rallies and corrections. For example, after peaking in 2012, gold prices fell sharply until 2015, only to rebound in subsequent years. This pattern indicates that while gold can reach new highs, it is also susceptible to corrections. “Investors should also consider seasonal trends in gold prices. Historically, gold prices tend to rise during the wedding season in the Middle East, which typically occurs in the second half of the year. This seasonal demand can influence prices, making it a crucial factor for jewelry buyers in Dubai,” an analyst noted.
Analysts argue that the decision to buy gold now or wait for a dip ultimately depends on individual circumstances and risk tolerance. If you believe in the long-term value of gold, purchasing now may be a prudent decision. Historical trends suggest that gold tends to appreciate over time, making it a reliable store of value.
Ahmad Assiri, research strategist at Pepperstone, noted that gold’s recent journey has seen a sell-off from $2,750/oz to $2,710/oz, followed by a recovery to $2,735/oz — highlighting the metal’s enduring appeal amid turbulent market conditions. “This price action reflects an ongoing tug-of-war between profit-taking by short-term traders and persistent buying interest from investors committed to accumulating gold on dips. While the recent dip might hint at a temporary consolidation phase, it has also demonstrated gold’s ability to attract fresh bids quickly, reinforcing the notion that key buyers are stepping in with confidence. This underscores that despite short-term corrections, gold’s value proposition remains intact as a store of value.”
With inflation rates remaining high, purchasing gold now can serve as a hedge against eroding purchasing power, according to precious metal experts. If central banks maintain low interest rates or adopt dovish stances, gold may become more attractive to investors. Conversely, if inflation is brought under control and central banks begin to raise interest rates aggressively, gold prices could face downward pressure. Ongoing geopolitical issues, such as conflicts, trade disputes, and political instability, can drive demand for gold as a safe haven. Any escalation in global tensions could lead to increased buying, they said.
Source link: https://www.khaleejtimes.com
