Akshaya Tritiya 2024: Analysts advise caution on gold buying

As Akshaya Tritiya, also known as Akha Teej, approaches on May 10, people will rush to buy gold, which is considered as ‘Shubh’ (auspicious) in Hindu tradition. Apart from the religious aspect, gold is a safer asset as well as a good portfolio diversifier, providing a hedge during adverse market conditions such as inflation, geopolitical and macroeconomic uncertainty.

Given the skyrocketing gold prices, it remains critical to analyse whether one should invest in gold this Akshaya Tritiya. Last month, international spot gold price scaled a new high of $2,431.53 per ounce on intraday on April 12, amid growing geopolitical risk, steady central bank buying, and resilient demand for jewellery and bars and coins.

On May 9, international gold price remained weak, but is holding above $2,300 per ounce as investors anticipate a rate cut by the U.S. central bank later this year. In India, the cost of 10 grams of 24-carat gold is hovering around ₹73,800 levels.

In the backdrop of higher gold prices, analysts have advised investors to exercise caution on gold buying.

Hareesh V, Head of Commodities, Geojit Financial Services, says, “Since domestic gold prices are hovering near record highs, there is a chance of a technical correction in the immediate run. But in the long run, firm overseas prices, increased physical demand, and a weak Indian rupee (INR) would assist prices to retain their bullish outlook. Hence, cautious buying in minimal quantities is recommended at this Akshaya Tritiya.”

He further says that domestic gold has more than doubled in the last 5 years, and it gained 10 times since 2003. “So, investors can make use of every price correction to add the metal into his/her portfolio for long-term benefits."

Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities also advised investors to accumulate gold in smaller denominations rather than making large purchases during the Akha Teej festive season. While gold is considered auspicious for buying during Akha Teej, current prices around ₹71,000 may be slightly expensive, he says.

Additionally, investors should consider factors such as market trends which are a bit volatile, geopolitical events on Middle-East crisis and interest rate cuts delay, and their own financial goals before investing in gold during Akha Teej, says Trivedi.

“Timing purchases strategically and diversifying investments can help mitigate risks and maximise returns in the long term," he adds.

Echoing the same, Umesh Mohanan, ED & CEO, Indel Money, says the elevated gold prices in the domestic market may marginally impact yellow-metal’s demand during the festive season. “There may be a decline in the volume but in value terms the business may not see a significant downfall. In India, gold jewellery is primarily an investment and every year people try to buy a bit of it, however small it may be, as they value it much more than any other investment.”

Mohanan further says there are other reasons to buy the yellow metal. “The cultural and aesthetic values of the precious metal persuade Indian households to buy gold irrespective of whether the economy is doing good or bad. Gold loan is fast emerging as a viable loan option, which further enhances the liquidity of the yellow metal.”  

On the other hand, CA Krishnan R, Director & CEO, Unimoni Financial Services believes that customer demand for gold tends to rise during Akshaya Tritiya, as it is considered a lucky day for purchasing gold and jewellery. “While Gold jewellery has cultural significance and has a store value, it is essential to weigh the pros and Cons before buying gold. Though gold is considered a good investment against inflation and provides immediate liquidity, it does not provide consistent returns like stock or bonds and also has costs associated with storage.”

Krishnan says that buying ‘gold ornaments’ may not be advisable as investments considering the additional cost of making ornaments. Instead, gold bullion coins can be purchased. 

Meanwhile, Deveya Gaglani, Senior Research Analyst - Commodities, Axis Securities expects gold prices to touch ₹77,000 by the next Akshaya Tritiya (2025), as investors may flock towards yellow metal due to uncertainty in the global market. “It is advisable to invest in Gold ETF, Gold sovereign bond, and Gold Bees instead of physical Gold to avoid storage, theft, or purity risk,” says Gaglani.

Gold has been an attractive investment asset for investors across the globe, including India, due to its outstanding return of more than 50% compound annual growth rate (CAGR) in the domestic market over the last two and a half years. It recently reached historic levels of ₹70,000 in India, mainly due to geopolitical tensions and Central Banks' accumulation of Gold reserves, which have outweighed the hawkish stance adopted by the U.S. Fed officials this year. 

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