Gold Correction Creates Opportunity Amid Festive Demand

After a record-breaking two-and-a-half year rally that ended in January this year, gold prices have corrected by around 15% from their peak. Gold prices peaked at Rs 1,76,305 per 10 gm on January 29, but have since fallen to Rs 1,51,301 as of September 16.

Despite the correction, experts say there are three reasons why gold remains a popular choice among investors: it has beaten equity returns over the past two and a half years, its traditional safe-haven appeal during times of uncertainty continues, and demand for gold typically picks up during the festive season.

Chintan Haria, head of products and strategy at ICICI Prudential Asset Management, says: 'Gold plays an important role in a portfolio. It is not just an investment for returns, but also for protection.' He adds that adding gold exchange-traded funds (ETFs) to a portfolio can reduce overall risk.

Vikram Dhawan, head commodities and fund manager at Nippon India Mutual Fund, says the combination of tighter monetary policy, elevated positioning, and geopolitical uncertainty is likely to keep volatility elevated. He notes that even though gold continues to receive support from resilient ETF demand and central bank buying, it may be a 'sharp two-way price move'.

A report by the World Gold Council (WGC) found that gold ETFs have seen significant growth in the first half of this year, with demand reaching 23.50 tonnes, up 163% from the previous year at nine tonnes. The report also notes that Indian households currently hold an estimated 31,000 tonnes of gold, valued at approximately Rs 314.90 lakh crore ($3.40 trillion).