The heavy buying was prompted by perception of gold as a hedge against inflation than mere festive buying, said experts. Buying was also boosted by the massive returns that investors earned from their gold investments last dhanteras.
Investors, who spent on gold on dhanteras last, year have seen their investment appreciate by more than 38%, much higher than returns from other asset classes such as equity or debt. However, experts said that a correction in gold prices can't be completely ruled out in the short-to-medium term, particularly if inflation starts easing. "It is difficult to predict the movement of gold over a shortterm period and the ongoing price spurt is clearly an outcome of global uncertainties, inflation and rupee depreciation," said Chaitanya Pande, head of fixed income with ICICI Prudential Mutual Fund. However, once inflation starts easing, gold can be expected to underperform, he said.
"But as gold is not correlated to other assets, it carries significant importance as a diversification hedge," he added.
Attributing the decline in rupee as one of the main reasons for the surge in gold prices, he said, "While dollar gold has appreciated by about 13% since July this year, appreciation in rupee gold has been about 23%." Concurring with this view, Lalit Nambiar, fund manager and head of research at UTI Mutual Fund, said, "Gold is appreciating as investors are losing trust in currency. With currencies getting debased globally, gold is gaining firm ground as an investment avenue as it retains value in real terms. Given the current scenario, we don't anticipate a bear case for gold."
bakul.chugan@timesgroup.com
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