What's Behind Gold's Record Run? Naresh Katariya Explains Why It's Different This Time

Gold prices hit a fresh record high of levels above the Rs 1,14,000 mark driven by festive demand and safe-haven demand. Private investor Naresh Katariya believes a perplexing new bull run in the gold market is underway, led by "some large hands" rather than the typical retail investors and ETF flows that drove the bull market in the 2000s.

With Indian gold imports flat and retail participation only starting to warm up, Katariya finds the current setup a "very perplexing." He highlights a key, forward-looking point that a leading wealth management firm, Morgan Stanley has recommended a 20% allocation to gold.

"I would have been slighlty cautious in a normal bull market. Morgan Stanley has recommended a 20% allocation to gold. There is a new leg that has come up to the gold market," he said.

The investor also sees an interesting setup in the market where jewelers are shorting gold to hedge their holdings, a mindset he finds "very interesting."

Despite the rally, which has seen gold run up 45% in the last year, Katariya is "not as bullish as earlier" but remains confident, advising investors to stay put as there's more to this market. He said that the primary drivers of this market are not the usual players.

"The flows should have explained by declared central bank buying, jewellery buyers or investing via ETFs. I would stay put as there's more to this market. Ofcourse its stretched, its run up 45% in the last year. I'm not as bullish as earlier but it looks interestingly poised. Retail has just joined," he notes. Instead, he believes the current price action is being driven by undeclared central bank buying.

"Another suprising thing would be that jewellers are short on Gold. They hedge thier gold and do not want any upside. Its a very interesting mindset and set up from investors," he said.

He also reveals a shift in his own portfolio, acknowledging that he has been "late to the Silver party."

In India, the prices held steady at Rs 1.14,360 per 10 gm, according to the India Bullion Association, compared to Rs 1,14,370 on Tuesday.

Gold had crossed the Rs 1,10,000 mark on Sept. 15, and the possible rate cut from the Fed had drove the rally.

"I've been late to the Silver party. Central banks have started buying. Its an industrial metal, especially in the solar market. But silver is less than 5% of the gold market. I would allocate higher to gold and also a bit to silver," he said.

He notes silver's dual role as an industrial metal, especially in the solar market, and an investment asset, with central banks also beginning to buy. Due to silver's small size, less than 5% of the gold market, he would "allocate higher to gold" when compared to silver.