Gold prices, which have reached record highs within the country and in the global market, may soon fall. Such apprehension has been expressed by Manoj Jha, co-founder of Kamakhya Jewels. Speaking to CNBC-TV18, Jha said that it seems that gold has entered the “bubble zone”. It may see a period of profit-booking in the coming months. In India, the futures price of gold for delivery in December on Multi Commodity Exchange rose by 2.12 percent to Rs 129700 on October 20.
Globally, spot gold prices rose 0.1% to $4,253.33 an ounce. US gold futures for December delivery rose 1.3% to $4,266.30 an ounce. Expectations of further interest rate cuts by the US central bank Federal Reserve and global economic uncertainties are the main reasons behind the rise in gold.
gold at its turning point
According to Jha, “Gold has reached its turning point. Investors are also a little worried. Earlier, gold had shown big gains in 1979-80 and again in 2010-11. But after those highs, there was a big decline.” According to Jha, the recent surge in gold prices has increased investors’ portfolio allocation more than usual. “Normally, people keep 10-12% gold in their portfolio, but after the recent rise in prices, this ratio has increased to 18-22%. Hence, people may want to book profits now as gold is in the overbought zone,” he said.
Long term investors can reinvest money in case of decline
Jha believes that the price of gold will fall by about $300-400 an ounce in the near future. He said that at this stage you can expect new investment opportunities. Jha suggests that long-term investors can invest again when prices stabilize. Despite fears of a short-term fall in gold prices, Jha is optimistic about festive and long-term demand in India.
He says that this year the demand for jewelery during Dhanteras was better than expected. Despite record prices sales declined only 15–20%. Bullion sales increased by more than 25% on annual basis. Despite the high prices, Jha believes that the fall in the near future will be good for the market, which will maintain investor interest going forward.