Investment demand for gold continue to rise in 2021

The surging Covid infections also adds a cherry on the cake for global investors to increase their allocations towards the yellow metal

New Delhi: The investment demand for gold will continue to rise in 2021 taking in to consideration the unprecedented amount of liquidity flush by central banks across the globe. A report by Angel Broking says the surging Covid infections also adds a cherry on the cake for global investors to increase their allocations towards the yellow metal.

Although the physical demand numbers released by the WGC do not represent a good story for India, Diwali is considered to be auspicious occasion for buying gold and irrespective of the price, gold is bought by Indians. “It is advisable to increase gold allocation in your entire portfolio from 10% to 15 % taking in to consideration the uncertainty revolving around the global economy,” the report said.

---

According to the World Gold Council, India’s gold demand is expected to fall to the lowest level in 26 years with domestic bullion prices hitting a record high and falling disposable incomes could further curtail retail purchases. India’s gold consumption in the first half of 2020 plunged 56 per cent on-year to 165.6 tonnes.

Meanwhile, the coronavirus-triggered lockdown also slashed demand by 70 per cent in the June quarter to 63.7 tonnes, the lowest in more than a decade. On the other side, the global pandemic continues to hurt the economy, which in turn is negatively impacting consumer demand for jewellery and technology.

According to a report by Angel Broking, on the flip side, investment demand, primarily through gold ETFs remains strong. Gold ETFs have added more than 1,000 tonnes for the first time ever, surpassing the 2009 record of 646 tonnes. North American funds represent nearly 2/3 of global net inflows on the year. It clearly says that, the fundamental support for gold investment demand is unlikely to change, irrespective of any global uncertainty. Till the time monetary policy is easy, gold will continue to shine.

As per the report, 2020 has been the best with double digit returns of 23 per cent for Spot gold in the international markets and 28 per cent on MCX futures. With blistering performance of the yellow metal so far, it brings us the key question, whether it is the right time to purchase gold this Diwali considering the gold prices at elevated levels, not only in the international markets, but also in the domestic markets.