Gold Rise Marginally After US Fed Statement: Know What Lies Ahead And How to Invest?

Despite the US Federal Reserve's decision to leave interest rates unchanged at 5.25 to 5.5 per cent yesterday, today on May 2, 2024, gold prices rose marginally. The Fed's policy announcement on Wednesday indicated that it is still leaning towards eventual cuts. Typically, gold prices move inversely to interest rates, and Fed hinting at eventual cuts, is line with this uptick in gold price. Currently as per goodreturns, the price of one gram of gold stands at Rs 6,640 for 22 karat gold, up Rs 70 from the yesterday.

Following the Fed's announcement, international gold prices had also surged marginally for the second consecutive day. The yellow metal's value rose by 0.3 per cent to USD 2,325.02 per ounce in the global market, after a 1 per cent climb in the preceding session, said a Reuters report. This surge was also supported by a retreat in the US dollar and U.S. Treasury yields.

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How To Invest in Gold: What Lies Ahead?

Gold has outperformed both Nifty and the S&P Sensex in terms of returns by a significant margin in 2024. As outlined here with a year-to-date (YTD) return of 16.16 per cent as of April 19, 2024 gold is far ahead of Nifty and Sensex return, which stood at 1.91 per cent and 1.17 per cent, respectively.

The bullish trend in gold prices has continued steady since 2022. Since mid-February, gold breached many historical records. In future the surge is expected to continue since Central banks across the world have been increasing their gold reserves since 2022 to manage currency fluctuations.

Another factor for a potential price rise in the future is Fed chair Jerome Powell indicating three cuts later this year. Further, geopolitical tensions continuing in Russia-Ukraine and Israel-Iran, plus 50 countries heading for national elections are expected to drive investors towards safe investments like gold.

Outlook Money recommends gold investment just for portfolio diversification, only up to 5 to 10 per cent of your portfolio. For those having less that this ratio and looking to invest, use options like sovereign gold bonds (SGBs), digital gold, gold futures, gold exchange-traded funds (ETFs), and gold fund of funds (FoFs) to invest in a staggered manner. About the timing experts here feel that once geopolitical tensions cool down a mild correction in gold prices may occur when you can invest 5 to 10 per cent in gold.