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Akshaya Tritiya Outlook: Silver Set to Shine Over Gold in Near Term

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Akshaya Tritiya Outlook

Akshaya Tritiya Outlook: As of May 2024, gold and silver have both experienced positive year-to-date growth.

There has been a 13% increase in gold prices since the last Akshaya Tritiya (an auspicious Hindu holiday that marks the start of a new financial year for precious metals).

During the same period, silver prices have increased by 11%.

The MOFSL recommends the following investments:

Silver and gold remain positive according to MOFSL.

It is recommended to buy gold and silver during price dips (when prices are falling).

The target prices are as follows:

  • In the domestic market, gold costs Rs 75,000 and silver costs Rs 1,00,000.
  • The Comex (a commodities exchange) charges $2450 for gold and $34 for silver

Returns on Gold and Silver (Rs) in 2024

In Q1’24, gold and silver both increased, matching or even exceeding gains in other major asset classes. MOFSL achieved its gold annual target and met more than 85% of its silver goal, the brokerage said.

There has been no significant impact of supply and demand issues on gold prices in the past, particularly when the market is experiencing more extreme uncertainty. However, given the recent, strong increase in gold prices, some cooling is not impossible.

Positive factors (tailwinds):

A weaker economy may lead investors to seek safe-haven assets like gold.

Investors might invest in gold if they are concerned about the economy slowing down, similar to weak economic data.

Interest rate cut expectations: If interest rates are expected to decrease, gold may become more attractive than interest-bearing bonds.

Geopolitical tensions can have an impact on gold investments.

Gold can serve as a hedge against inflation if government or corporate debt is rising.

The general rise in demand for gold can push prices up due to factors like increased jewelry consumption.

US bond yields falling can make gold more attractive relative to bonds if US bond yields fall.

The following are negative factors (headwinds):

Volatility during election years: Gold prices tend to be more volatile during election years. Over 40 countries will be holding elections in 2024, creating uncertainty.

The actual impact on prices might be muted because investors have already factored in positive events like a potential rate cut.

The black swan effect: Unforeseen events with significant economic impact can make gold prices fluctuate.

Gold prices in 2024 are likely to be influenced by more positive factors.

The gold market’s move so far

Since the start of this year, gold and silver have seen tremendous rallies as safe haven assets.

Two main factors trigger volatility in the bullion market:

Geopolitical tensions – Russia / Ukraine, Israel / Hamas, Israel / Iran, and other geopolitical triggers, increase risk premiums for safe havens

Fed’s monetary policy: Market expectations and Fed’s actions regarding interest rate cuts this year have kept markets on edge

Recent WGC reports indicate that central banks continue to purchase gold at a steady rate, adding 290 tonnes to their official holdings in Q1.

The global demand for bars and coins increased by 3% year over year to 312 tonnes, but jewellery declined by 2% year over year to 479 tonnes.

A record amount of gold was demanded by central banks in the first quarter, led by Turkey, China, and India.

Since the beginning of the year, Gold and Silver imports have been to the tune of over 150 tonnes and 3000 tonnes, respectively.

The jump in imports could be attributed to the CEPA deal with UAE under the 1% TRQ or to the import duty benefit that is applicable to other bullion articles such as granules and findings.

Returns on gold over the last 15 years

According to Motilal Oswal, over the last 15 years, gold has delivered a 10% CAGR. While there have been price corrections, the overall rise in price has been consistent and steady.

Prices and returns (%) of gold over the last 15 years on Akshaya Tritiya

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