Gold has its unique allure because it is both jewelry and an investment asset class. Buying gold during Dhanteras, on the other hand, might elicit a different amount of excitement because the day is regarded fortunate. While it is impossible to quantify people’s pleasure as a result of this auspicious investment, the rewards may.
On November 7, the price of 10 grams of gold was Rs 60,579 in India. According to the India Bullion and Jewellers Association Ltd, this was a 21% increase over the price of Dhanteras last year, when the pricing of 10-gram gold (999) was Rs 50,062. While the investment provides a handsome short-term return, it is worthwhile to know the long-term return on the yellow metal acquired on Dhanteras, as well as if it makes sense for you to invest in gold on this good auspicious day.
Long-term returns on Dhanteras gold purchases were favorable.
Long-term returns on gold acquired near Dhanteras have been in the double digits. “Gold has historically provided good returns, and thus it is the best hedge against other asset classes,” says Surendra Mehta, National Secretary of the IBJA.
Long-term investors will find Dhanteras gold investments appealing. The 5-year return on such an investment in 2018 is 13.9%; however, the return is 7.1% for investments made in 2013. The returns for 15-, 20-, and 25-year periods are particularly lucrative since they exceed 11%.
|Dhanteras day gold buying – Historical returns in 2023|
|Year||Dhanteras||Price (10 gm, 999)||Holding Period||Absolute Return||Annualised Return (CAGR)|
|2022||Oct 22 (Saturday)||Rs 50,062||1 year||21%||21.4%|
|2020||Nov 13 (Friday)||Rs 50,645||3 years||20%||6.3%|
|2018||Nov 5 (Monday)||Rs 31,760||5 years||91%||13.9%|
|2013||Nov 1 (Friday)||Rs 30,510||10 years||99%||7.1%|
|2008||Oct 26 (Sunday)||Rs 11,925||15 years||410%||11.5%|
|2003||Oct 23 (Thursday)||Rs 5,830||20 years||942%||12.4%|
|1998||Oct 17 (Saturday)||Rs 4,360||25 years||1,294%||11.1%|
|1993||Nov 11 (Thursday)||Rs 4,598||30 years||1,222%||9.0%|
Returns for gold (999 purity) at Rs 60,772 per 10 grams as of November 7, 2023; gold price source: IBJA
The variables that are driving higher gold prices
Gold has long been one of the most popular investment items among Indians. This is because gold is regarded as one of the finest hedges against uncertainty and inflation. Gold prices, on the other hand, have been on a roller-coaster ride this year. “The volatility has been fierce until now, as gold marked a near-all-time high of $2,070 at the start of this year, then reversed, marking lows close to $1,800, and is now back to $2,000,” according to a Motilal Oswal Financial Services (MOFS) study.
The world economy is experiencing one of the most severe upheavals in decades, which has primarily benefited gold prices. “This year, gold and silver have seen sharp swings due to a few major fundamental changes such as central bank policies, geopolitical uncertainties, the debate between hard and soft landings, increased buying interest in riskier assets, and volatility in the Dollar Index and Yields.” “Geopolitics and the central bank’s policy stance have taken center stage,” according to the MOFS study.
The most important question for investors is whether geopolitical tensions will have a greater influence on gold. “The gold market has already discounted the Russia conflict.” “If the Israeli war escalates, gold prices will rise even further,” predicts Mehta.
Higher inflation and bond yields are also driving up gold prices.
According to the MOFS research, major central banks’ monetary policy actions have been fairly active; the US Federal Reserve has already raised rates by 525 basis points (bps) since last year, resulting in a slowing of inflation. Wage, energy, and food expenses, on the other hand, are raising worries among major central bankers, encouraging a continued hawkish attitude. GDP, retail sales, employment, and other economic indicators were stronger than projected, demonstrating the economy’s resiliency. A rising interest rate environment drags gold, a non-yielding asset. As a result, a shift from the existing posture is required for gold prices to continue rising.
Overall demand for yellow metal will remain strong.
India has historically been one of the largest users of the yellow metal, and this is unlikely to alter in the foreseeable future. “Gold consumption in India increased by 10% to 210.2 metric tons during the July-September quarter of the calendar year, up from 191.7 metric tons in the same period the previous year.” “This was driven by improvements in gold consumption for wearable purposes as well as an appealing asset class for investments, which boosted overall demand due to price corrections,” explains Colin Shah, MD, Kama Jewelry.