Gold - Outlook Remains Positive, Sovereign Gold Bonds Best Way To Take Exposure: ICICI Direct

ICICI Direct Report

Recently, gold prices have been globally on an uptrend since November 2022 amid moderating U.S. retail inflation numbers and anticipation of a less aggressive U.S. Federal Reserve.

Further, the U.S. dollar as well as U.S. bond yields have begun to cool off, which has been supporting gold. Buying by global central banks and the potential positive impact on gold demand given the opening up of Chinese markets have also boosted prices.

Gold prices are up 13% in the last four months, both globally as well as in India.

Domestically, it is up 28% in the last two years (13% compound annual growth rate) and 78% in the last four years (15.5% CAGR). The historical long term return of Indian gold is around 10% per annum.

Recent return in gold is higher than long term average and, therefore, mean reversion may lead to moderation (lower than long term average return of 10% per annum) in return in the near term.

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