Despite dominating other assets throughout the year, gold return in year-to-date (YTD) time missed to beat stock market return in 2023. Thanks to recent Santa rally ahead of Christmas, which enabled Nifty 50 index to register 8.50 per cent rise in last one month, which lifted 50-stock index return to near 18 per cent in YTD time. Though, the precious yellow metal also witnessed some buying interest in last one month, its return in month-to-date (MTD) is around 3 per cent only. However, a return of 13 per cent in YTD is much higher than risk-free options like bank FD (fixed deposit), public providend fund (PPF) and other government-backed small saving schemes.
According to commodity market experts, US banking crisis, geo-political crisis, US Fed’s rate pause stance were among some important triggers that helped gold to remain an investor’s haven throughout the year. They said that gold prices are expected to remain in uptrend as US Fed has hinted end of high interest rate cycle and cut interest rates thrice in 2024.
Gold vs stock market
Speaking on gold price return in 2023, market expert Sugandha Sachdeva said, “Gold proved its timeless allure in 2023, reaching a record high of Rs. 64,460 per 10gm and outshining major indices like Nifty and Sensex for most of the year. Prices surpassed the previous record high of around $2081 per ounce, entering uncharted territory toward $2,148 per ounce. Though Nifty edged ahead with an 18% year-to-date gain by year’s end, gold still remained buoyant and delivered a respectable near 13 per cent return.”
On why gold return dominated most of other assets in 2023, Amit Goel, Co-founder & Chief Global Strategist at Pace 360 said, “Barring recent Santa rally on Dalal Street after US Fed’s signal to cut interest rates thrice in 2023, gold has outperformed Nifty 50 index and most other global equity indices in CY 2023. Investors have been buying gold this year because of fears of an imminent slowdown, which will obviously catapult gold to much higher levels. Central bank buying of gold so far this year to the tune of 800 metric tonnes has also been an important factor.”
Advising stock market investors to have some exposure in gold also, Narinder Wadhwa, National President at CPAI said, “Over the past two decades, Nifty, representing the Indian stock market, and gold have exhibited distinct performance trends. The comparison highlights the contrasting nature of these assets over the specified period. The Nifty 50 index delivered 14 per cent CAGR in the last 10 years and 14.9 per cent in the last 20 years whereas Gold has, on an average, returned 11.2 per cent in the last 20 years.”
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“Investing in gold is hedge against inflation while Nifty’s returns reflects the cyclical nature of the stock market, influenced by economic indicators, corporate earnings, and global market dynamics. Periods of bullish trends were often followed by corrections or bearish phases,” said Wadhwa.
Triggers for gold in 2023
“We believe, US banking crisis in early 2023, global economic slowdown and geo-political tension are some of the major reasons which helped Gold and Silver to beat stock market returns across the globe by a huge margin barring few like India. Despite continued interest rate hikes by Fed and rising bond yields, gold prices increased due to concerns about a global economic slowdown. Also, recent geopolitical conflict between Israel and Hamas has increased market volatility, making gold as the preferred asset class due to its inherent stability during times of crisis,” said Rajesh Sinha, Sr. Research Analyst at Bonanza Portfolio.
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Sugandha Sachdeva listed out the following 5 triggers that helped gold deliver whopping return to investors in 2023:
1] Safe haven appeal:
The year started with the US banking crisis, pushing risk-averse investors toward gold’s safety net.
2] Geopolitical tensions:
Even as prices cooled off in the second and third quarter, conflict between Israel-Hamas in Q4 rekindled demand for gold as a store of value.
3] Dovish Fed and softening dollar:
The Fed’s pivot towards potential rate cuts in 2024 weakened the dollar, boosting gold’s appeal.
4] Central bank appetite:
Strategic gold purchases in large quantities by central banks provided further upward pressure.
5] Strong festive demand:
Q4 saw robust gold buying during the Indian festive season.
Gold price outlook
“For the week ahead, the trend looks positive but investors should be mindful of potential headwinds, where the level of ₹62,800 per 10 gm remains a wall of supply. A breach of the same could result in follow-up buying, while lifting prices towards ₹63,500 per 10 gm. However, prevalent risk-on sentiments in the markets could favor risky assets, potentially causing some consolidation in gold prices. Furthermore, a rebound in the greenback could take some shine off the yellow metal, where support is pegged at ₹61,200 to ₹60,700 per 10 gm zone,” said Sugandha Sachdeva.
