Gold prices have touched record highs, drawing fresh interest from investors who are looking for safety at a time of global uncertainty. The recent rise has raised an important question for many people: is it still worth investing in gold at current levels, and what kind of returns can one expect from here?
According to market experts, the latest rally in gold is not driven by jewellery demand or fresh buying by central banks. Instead, it is largely linked to fears around global debt and unstable bond markets, especially in countries like Japan and the US. Even after interest rate hikes, bond yields in some markets have continued to rise, which has made investors uneasy about inflation staying high for longer.
Kunal Shah, Vice President and Head of Commodities Research at Nirmal Bang Securities, said investors are buying gold mainly to protect themselves against risk. “I believe that what we are seeing is a fear of complete monetary reset, the way the Western world's debt and especially recently the recent upside in gold is basically on account of what we saw happening in Japan. Even after the interest rate hike, we've seen bond yields shooting up and making fresh highs. This generally doesn't happen. So, market is not ready to accept that inflation is going to go down,” he said.
He added that this buying is purely from investors hedging their risk due to unstable bond markets. “This is not driven by the jewelry demand. This is not driven by central bank buying lately. This is purely investors rushing to hedge their risk,” Shah said. He expects gold prices to move towards 4550 to 4600 levels, while silver could rise to 72 to 75 dollars.
On returns, Shah advised investors to lower their expectations from here. “From here, you should taper down your return expectation but the trend definitely seems to be pretty strong,” he said.
For those worried they may have missed the rally, Shah believes gold is still worth holding. “If you are still expecting 15%, 20% return from here, then I don't mind. Whenever you see after this kind of run-up, if there is any profit taking, you can add a peg more there,” he said. He also said there is nothing bearish for gold in the short term, suggesting investors can remain invested, but with realistic return hopes.
