Gold and silver prices marginally declined on Tuesday, May 16. On the Multi Commodity Exchange (MCX), gold futures were trading at Rs 61,498 per 10 grams, after recording a fall of 0.14 percent. Silver futures were trading at Rs 73,298 per kg, after witnessing a dip of 0.27 percent.
This is line with global market, where rates eased in a narrow range as traders assessed comments from US central bank officials on interest rates staying high, while the US debt-ceiling debate and risk of a default curbed further losses in bullion. Spot gold fell 0.2 percent to $2,016.72 per ounce by 0237 GMT, while US gold futures were down 0.1 percent to $2,020.20, according to Reuters.
The trigger
Fed members continue to push back on rate cuts this year and that is pushing gold slightly lower, Matt Simpson, a senior market analyst at City Index was quoted as saying in a Reuters report.
"Gold's failure to hold above the previous record high has shaken confidence," he said.
The outlook
According to Rahul Kalantri, VP Commodities at Mehta Equities Ltd, focus this week is on the US debt-limit extension talks between the White House and Congress. The US retail sales and industrial productions data could give more clarity on the Fed’s stance on further interest rate hikes.
He added that gold has support at $2,004-1,992 per ounce while resistance is at $2028-2040 per ounce. Silver has support at $23.78-23.55 per ounce, while resistance is at $24.32-24.50 per ounce. In rupee terms, gold has support at Rs 60,780-60,550 per 10 grams, while resistance is at Rs 61,290, 61,450 per 10 grams. Silver has support at Rs 72,450-71,820 per kg, while resistance is at Rs 73,850–74,370 per kg.
Should one invest?
However, experts recommend adding up to five to ten percent of total investment portfolio in gold, depending on the investment objective, risk profile and time horizon.
Short to mid-term investment is always fine in gold. Like any other asset class, it is difficult and futile to time the market, whether it is gold or equity. So, the thumb rule for gold is to allocate up to 10 percent of savings/portfolio in gold-related instruments and stay invested to get the benefit of appreciation in gold prices which have a tendency to catch up with inflation.
On top of that, diversification is important due to the uncertain economic environment and volatility in the stock market, experts say.
Jaydeep Banerjee, Co-Founder at Dvara SmartGold believes that gold will always be a good bet, particularly in light of ongoing global risks. Additionally, gold's low correlation with traditional asset classes such as equities and bonds allows it to serve as a valuable diversification tool within an investment portfolio.
A low correlation, here, means that different asset types have not performed in the same way. For investors, this diversification has obvious benefits.
