As the festive season in India approaches, the lure of buying gold and gold ornaments increases manifold. One such very special occasion is Dhanteras. Dhanteras happens to fall on the first day of the five-day-long Diwali festivity. Interestingly, the festival also goes by the name 'Dhanatrayodashi' or 'Dhanvantari Trayodashi'. The word 'Dhan' means wealth and 'Trayodashi' means 13th day as per Hindu calendar. Dhanteras usually falls on a day or two before Lakshmi Puja during Diwali.
The reason why it is considered so auspicious to buy gold on this particular day is because of the belief that on Dhanteras goddess Lakshmi visits the homes of her devotees and fulfils their wishes. It holds special significance for the business community due to the customary purchases of precious metals on this day. Also, Lord Kubera, the God of assets and wealth is also worshipped on this day.
Coming to the broader fundamental factors that majorly affect the gold prices globally are fairly placed, supporting a positive prices scenario in the short to medium term. At one hand, the most important dragger for gold this year has been the hawkish US Federal Reserve, which has already increased the benchmark interest rates twice already and is looking on track for one more hike in December this year. However, despite that gold prices have managed to outperform the S&P 500 index this year so far, because of the lower inflation in the US economy, which has ensured that the real interest still remain lower.
On the other hand the geopolitical tensions around North Korea and US turned out to be a boon for gold prices for major part of the year and were one of single most important factor to push prices towards $ 1360/ounce. The physical demand was also pretty much strong throughout with India dominating the trend in first half ahead of the GST implementation, however, a strong pattern was visible in China as well on account of lower domestic equity markets. The ongoing weakness in the dollar against the basket of currencies, especially due to sharp recovery in the Euro on expectations of stimulus to be ending in the Euro zone and over extended bull run in equities that has sent the volatility index lower to record lows is warranting that it is high time one should start increasing exposure in to gold.
Going ahead for the year 2018, we expect gold to continue trading firm and continue to provide the optimum diversification to one's portfolio. Gold as an asset class has outperformed equities and other asset classes over longer periods of time and that is why the consolidation periods like these typically provide the right opportunity to accumulate.