In the last two years, gold prices in India have surged significantly, risen around 75 percent and hit new record highs. In 2020 alone, international rates have risen over 30 percent thanks to the precious metal's safe-haven appeal amid the COVID-19 induced economic uncertainty.
Since October 2018, the metal's rates were climbing due to trade tensions between the US and China. In the current year, while tensions between the two largest economies continue, concerns that the global economic recovery from the pandemic will not be as quick as earlier expected has investors looking for refuge in the bullion.
In a recent report, ICICI Direct said that it believes there the climb isn't over. It expects gold prices to rally towards Rs 70,000 per 10 grams from a long term perspective and has advised investors to continue to benefit from the multi-year trend.
It noted that historically, over the past five decades, larger uptrends in international gold prices have lasted at least for three to four years and in the current context it is only the second year of the uptrend. It expects the uptrend for another couple of years.
"In the current era of COVID-19 pandemic where there is heightened uncertainty and concerns around global growth and human lives, there was bound to be some interest in safe-haven assets like US government bonds and gold. However, the extent and the intensity of the rally in global gold prices have taken everyone by surprise," ICICI Direct said in its report.
The brokerage has a positive outlook on gold prices, provided the uncertain outlook on global growth and volatility in other asset classes like global equity, commodity, and currency markets remain.
Massive stimulus measures announced by major central bankers, extremely low-interest rates, and increased buying interest of global central bankers will also keep the yellow metal in demand, it said.
It has suggested that Indian investors can consider allocating 5-15 percent of their overall investment portfolio in gold.