The Indian stock market has been fluctuating recently due to rising global uncertainties. The Nifty 50 index remains over one percent below its peak from earlier this month, while concerns about a potential U.S. recession, China's economic slowdown, and escalating geopolitical tensions in the Middle East weigh on investor sentiment. Despite these challenges, India’s macroeconomic fundamentals remain strong, and analysts don’t see significant risks to the country’s long-term growth.

With the festive season approaching and economic uncertainties continuing, many investors are considering gold as a safe investment. Traditionally viewed as a secure option during volatile times, gold may become even more attractive in the coming months, especially with the possibility of interest rate cuts by central banks, including the U.S. Federal Reserve and the Reserve Bank of India.

Experts believe that global interest rate cuts, aimed at easing economic slowdowns, could drive up gold's appeal as a hedge against inflation and currency volatility. As a result, gold prices may surge during the festive season, offering investors an opportunity to protect their portfolios from the uncertain global economic landscape.

Is it time to invest in gold?

The MCX gold rate has increased by nearly 12% this year, while Comex gold has advanced by 22%. Traders are now expecting a 73% chance of a 25-basis-point interest rate cut by the U.S. Federal Reserve at its upcoming meeting. There’s even a 27% chance of a larger 50-basis-point cut.

Analyst Jigar Trivedi noted that the final quarter of 2024 will be critical for global markets, as major central banks are expected to begin rate cuts. Other factors like the upcoming U.S. presidential election and ongoing geopolitical tensions could further impact the markets. In India, the festive season around Dussehra and Diwali is expected to boost demand for gold.

“The recent rise in gold prices reflects market expectations of significant Fed cuts, with a 68% likelihood of a 25 basis point reduction in September,” Trivedi said. He added that the weakening dollar and falling Treasury yields have made gold an attractive option. In India, the price of 24k gold recently rose by Rs. 550 to Rs. 73,200 per 10 grams, showing strong demand.

Despite this, some investors are still cautious. Holdings in the SPDR Gold Trust fell by 0.20% recently, suggesting some hesitancy in the market.

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