A strong appetite for gold on Friday's Dhanteras is expected this year due to auspicious reasons and geopolitical concerns, continuing the 2022 trend driven by pent-up COVID demand.
Compared to last year's Dhanteras, gold prices have jumped 22 per cent and silver prices by 21 per cent, respectively.
"Gold and silver are good for portfolio diversification, especially in times of geopolitical turbulence.
"There is an expectation that the US Federal Reserve could start reducing interest rates in the near future, which could lead to a weakening of the dollar and a new bull market for gold,” DSP MF Head of Passive Investments & Products Anil Ghelani told PTI.
This could happen over the next few months, he said.
"Gold has performed well in the past during periods of equity market turbulence and geopolitical pressures.
"From October 2021 to March 2023, equities were down about 4 per cent.
"Gold, on the other hand, was up about 15 per cent," Ghelani said.
Vinod Bamalwa, ICC chairman of the Gems and Jewelry committee and director of Nemichand Bamalwa & Sons, said, "Gold demand is expected to grow by 25-30 per cent this Dhanteras, compared to last year.
"Gold prices have already risen by 5 per cent due to the Israel-Hamas conflict."
A recent study by Windmill Capital highlights that in times of geopolitical uncertainty, gold is expected to trend higher in the near term.
The study shows that on average, the yellow metal has returned about 11 per cent CAGR in the last 20 years.
While gold has always been in demand, there was a renewed surge in interest in 2022 after Russia invaded Ukraine.
In 2022, central banks bought a record 1,136 tonnes of gold, worth around $70 billion, it said.
Naveen KR, small case manager and senior director of investment products at Windmill Capital said, "It would be ideal to advise investors to invest in portfolios that include both gold and equities.
"The performance of gold will offset the poor performance of equities during unfavourable macroeconomic events or persistent high inflation."
According to data from the Association of Mutual Funds in India (AMFI), gold ETFs saw net inflows of around Rs 1,660 crore during the July-September 2023 quarter, compared to net outflows of close to Rs 165 crore during the July-September 2022 quarter.
Ashwini Kumar, head of market data at ICRA Analytics, told PTI: "A quick analysis of the returns generated by gold ETFs suggests that the average one-year returns across most of these funds range from around 20.6 per cent to 22.46 per cent, while the five-year CAGR returns across most of these funds range from around 12.84 per cent to 13.32 per cent."