Should You Buy Gold During The Festive Season?

During the festive season in India, gold prices typically see an upward trend due to strong consumer demand, especially around occasions like Dhanteras and Diwali, when buying gold is considered auspicious. This seasonal surge is also influenced by global gold prices, currency fluctuations, and domestic factors like import duties.

“Despite short-term price fluctuations, the festive season often drives higher prices as demand peaks. However, many investors see this as an ideal time to invest in gold, either physically or digitally, to secure wealth for the long term, as gold traditionally holds its value during uncertain times,” says Veer Mishra Founder, PLUS Gold, a fintech jewellery savings platform. 

In fact, gold prices in 2024 are expected to remain elevated due to several factors apart from the festive season. “The possibility of a series of rate cuts by the U.S. Federal Reserve is likely to drive demand for gold as investors seek refuge from a weakening dollar and reduced bond yields. Additionally, geopolitical uncertainties and persistent inflation fears could further enhance gold’s appeal as a safe-haven asset. Gold prices are heading towards $3000 (Rs 85,000) in the next 6 months on strong investment demand,” says Renisha Chainani, Head of research – Augmont – Gold For All, an integrated gold player. 

Should You Buy Gold? 

Buying gold during Diwali, especially on Dhanteras, is considered auspicious, with many believing it brings wealth and prosperity. With economic uncertainty, geopolitical risks, and potential Fed rate cuts on the horizon, gold remains a secure store of value, offering protection against inflation and currency fluctuations. 

Moreover, jewellers often provide discounts, freebies, or lower making charges during the festive season, making it a favourable time to buy physical gold jewellery or coins for long term.

“However, gold is currently trading near record highs, which could reduce the immediate upside potential. If you’re looking to invest primarily for short-term returns, waiting for a correction might be wiser. If your goal is investment rather than jewellery, digital gold or gold ETFs could be more cost-effective, as they eliminate making charges and storage issues,” says Chainani. 

Stick to 10 Per Cent Gold In Your Portfolio 

“Gold can play an important role in your financial plan, but it should not be the bulk of your investment. Eight to ten per cent exposure to gold can be an ideal investment. Economic and geopolitical uncertainty tend to be positive drivers for gold, due to its safe-haven status and ability to remain a reliable store of value,” says Hemal Shah, Fund Manager Torus Oro PMS. 

It has low correlation with other asset classes, so can act as insurance during falling markets and times of geopolitical stress. 

So, sticking to the 10 per cent recommendation is prudent for most investors, especially during times of uncertainty like 2024, with inflation concerns and geopolitical tensions. “However, it’s essential to periodically rebalance the portfolio based on individual goals and market conditions,” says Chainani.