Gold prices have almost gone up 16% in the last 3 months. Should you invest now?

Gold is on a red hot streak right now. The metal's record run is now making many wonder: Is now the time to buy gold? 

Gold rose more than 13% in the first quarter of 2024 and emerged as one of the best-performing asset classes compared to other avenues. 

Before investing in the precious metal market, you must look at the factors behind this rise and weigh the potential risks and rewards of investing in gold.

Gold is up more than 15% year-to-date, with most of the gains seen in the past month and a half. Deveya Gaglani, Research Analyst - Commodities, Axis Securities, said, "Gold price extended its positive momentum in 2024 by delivering a stellar return of around 15% in 2023 and 2022. Prices are up almost 16% in the last three months."

According to analysts, primarily, the untamed and volatile price trend of the yellow metal breaching new highs, in the backdrop of the recent Iran-Israel conflict, ongoing Russia-Ukraine war, has led to investors withdrawing from riskier avenues and reinvesting in gold. 

"Given the scenario of looming escalations between the countries in conflict and the response by G7, the price dynamics of gold will continue to be volatile and highly unpredictable, both internationally and domestically," said Colin Shah, MD, Kama Jewelry.

On the trade front, jewellery exports from India will get further sluggish owing to higher crude prices and tension, leading to a poor sentiment in the end-user class in international markets. "We wait and watch for the situation to normalise and hope for a truce with the best interest towards bringing economic stability,” said Shah.

However, analysts expect gold to rally further as several factors have turned positive for the yellow metal.

Should you invest now?
Prices recorded a high of Rs 74,000 last Friday due to heightened geopolitical tension, which caused investors to flock to gold because of its safe-have appeal. "The short-term trend is positive for gold as increased fear of war will keep gold on edge. The Central Bank is also piling on the gold reserve, which supports bullion prices. Presently, buying should be avoided as the rally looks overstretched. Buying around 69000-71000 level is recommended in a staggered manner for the long term," said Gaglani.

Pranav Mer, Vice President, EBG—Commodity & Currency Research, JM Financial Services. "Going ahead, we still maintain a positive view on bullion, with a focus on geopolitical developments in the Middle East, uncertainty over the central bank's interest rate cuts, central bank gold purchases, physical demand, etc." Mer further says, "For anyone looking to invest in gold or adding fresh to his portfolio, we advise to buy at dips and keep adding in a staggered manner as support is now seen at 70400 and next at 68000 levels; upside we see prices moving higher towards 75500-76000 levels in short-term."