Three reasons why gold prices may hold up

Deepening geopolitical faultlines, persistently high fiscal deficits being run by governments in the developed world, and therefore, diminishing faith in fiat currencies have helped gold prices clock a record-breaking rally lately.

While the prices are uncomfortably high for many, the three factors, mentioned above, have not changed. “I don’t think gold is going to lose its shine anytime soon,” Neeraj Seth, Founder & CIO of 3R Investment Management told CNBC-TV18.

According to Seth, these factors are cementing gold’s role as both a safe-haven asset and an alternative currency in investor portfolios.

“You do see that diversification element playing through the central bank reserves across the globe. So, you’ve seen the uptick in the central banks buying gold,” he said.

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Beyond central banks, Seth anticipates another wave of buying pressure could emerge from retail investors, who may be drawn in as they chase the rally’s momentum.

While central bank buying has been robust, investment in gold exchange-traded funds (ETFs) has lagged comparatively, suggesting that there is still room for further capital to flow into the asset from different types of investors.

Precious Metal funds saw $13.5bn of inflows in one week, a report from Elara Capital, a Mumbai-based broking firm, released on Sep  29 said. That’s the third-highest weekly inflow ever after two $16 billion spikes in the weeks ended April 16 and September 25 this year.

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For the entire interview, watch the accompanying video

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