Gold hits record highs: Time to invest or exercise caution?

Gold has reached unprecedented heights, with global futures surpassing $4,000 per ounce and Indian prices climbing past ₹1,21,000 on October 7. This surge, marking the largest annual gain since 1979, is driven by a confluence of factors including geopolitical tensions, economic uncertainties, and expectations of interest rate cuts.

Despite the allure, financial planners urge investors to approach this rally with caution. Santosh Joseph, founder of Germinate Investment Services, emphasizes the importance of distinguishing between long-term allocations and new investments. He advises against lump-sum investments, suggesting that systematic investing through gold-focused mutual funds or multi-asset funds can mitigate risks.

Vinit Iyer, CFA at Prudeno Wealth noted that the current high prices make new investments risky. He anticipates a potential price correction post-Diwali, recommending that investors trim fresh allocations for now.

The factors propelling gold's ascent include expectations of US interest rate cuts, which lower the opportunity cost of holding gold, and increased demand driven by geopolitical uncertainties. September witnessed the strongest monthly inflows into gold-backed ETFs, reflecting heightened investor interest.

To sum up, while gold's current rally presents opportunities, financial experts advocate for a cautious and strategic approach. Investors should consider systematic investment plans and remain vigilant of market dynamics to navigate this golden surge effectively.