Gold prices set for third straight monthly gain: Should you invest for long-term?

10. Around half of all gold mined today is made into jewellery, which remains the single largest use for the metal. (Image: Reuters)

Gold prices are set for a third straight monthly gain, even as bullion prices eased on Tuesday as the dollar firmed ahead of the Federal Reserve’s policy meeting starting later in the day.

Spot gold was down 0.2% at $2,329.69 per ounce, as of 0355 GMT.

US gold futures were down 0.7% at $2,341.00, as per news agency Reuters.

In the domestic market, gold maintained stability, with the price of 10 grams hovering around ₹72,000 on April 30.

Pure 24-carat gold commanded a trading value of approximately ₹72,590 per 10 grams, while 22-carat gold stood firm at about ₹66,540.

The appreciation of the dollar index by 0.3% acted as a counterforce, rendering greenback-priced bullion less appealing to international buyers.

Kyle Rodda, a financial market analyst at Capital.com, attributed this movement to gold prices readjusting in response to a stronger dollar and elevated yields, post the easing of geopolitical tensions.

The surge in gold prices, which has exceeded 4% this month, finds its impetus in robust central bank purchases and safe-haven inflows amidst geopolitical uncertainties, as per Reuters.

The upcoming Federal Reserve policy meeting from April 30 to May 1, alongside the impending release of non-farm payroll data, assumes significance for market participants.

Market sentiments indicate anticipation of the Fed maintaining its benchmark interest rate at 5.25-5.5%, although speculation looms regarding a possible recalibration of rate cut probabilities.

Rahul Kalantri, VP of Commodities at Mehta Equities Ltd, highlighted the nuanced dynamics influencing precious metal markets.

He noted a slight uptick in gold prices, driven by profit-taking from the dollar’s recent highs.

However, the resolution of tensions between Israel and Iran, tempered expectations of immediate Fed rate cuts, and indications of US market recuperation collectively subdued precious metal sentiment.

“Gold finds support in the range of $2310-2292 per ounce, with resistance at $2350-2368 per ounce. In India, gold’s support levels are at ₹71,420 and ₹71,150 per 10 grams, with resistance at ₹71,780 and ₹71,920 per gram,” Kalantri said.

Investment considerations

A recent note from Value Research underscores the need for investors to maintain a balanced perspective on gold’s role within their portfolios.

While the precious metal has showcased a return of approximately 20% over the past year, its long-term returns present a less compelling narrative.

Over a decade, gold has yielded an average return of around 8%, a figure overshadowed by other asset classes such as equities, exemplified by the Sensex, which has yielded over 12% returns in the same period

Gold’s suitability as a store of value and its propensity to thrive in times of market uncertainty or fear is undeniable.

Yet, Value Research cautions that as a long-term wealth-building tool, gold may fall short of expectations.

Investors should recalibrate their expectations and investment strategies accordingly, acknowledging gold’s unique role within a diversified portfolio.