Perspective on Gold by Mr. Piyush Mehta, Smallcase manager, Caprize Investment Managers
Below the Perspective on Gold by Mr. Piyush Mehta, Smallcase manager, Caprize Investment Managers
“Gold prices have remained volatile this week, pressured by elevated crude oil prices, inflation concerns and expectations of tighter US monetary policy.
Escalating tensions involving the US, Israel and Iran continue to cloud the global outlook. While geopolitical uncertainty traditionally supports gold as a safe-haven asset, rising energy prices are fuelling inflation concerns, potentially
delaying monetary easing and keeping US bond yields and the dollar elevated. This raises the opportunity cost of holding non-yielding gold, limiting its upside despite heightened geopolitical risks.
An important distinction is between geopolitical uncertainty and a broader global risk-off event. During acute liquidity pressures, rising margin calls or forced deleveraging, investors may sell assets across the board, including gold, to raise cash. Gold, therefore, is not immune to short-term market dislocations.
Near-term outlook and investor takeaway: Gold is likely to remain volatile, with $4,000 per ounce an important psychological level to watch. Further escalation in Middle East tensions could revive safe-haven demand, while a stronger dollar and hawkish Federal Reserve expectations may constrain gains. Longer term, central-bank purchases, geopolitical fragmentation and portfolio diversification should support gold’s investment appeal.
For investors, the prudent approach is to view gold as a portfolio diversifier and long-term hedge, rather than a guaranteed short-term safe haven. Maintaining a measured allocation aligned with individual risk tolerance, investment horizon and overall portfolio exposure is preferable to making tactical decisions driven solely by geopolitical headlines.”
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