The markets gave us another scare today, as they started to come off during the day. However, by the end of the session, they had recovered almost all of the lost ground and closed at levels similar to where they were yesterday. This is a clear indication that, no matter what happens, the market is not going down right now. These comebacks are a strong sign that the bulls are not giving up. I believe it’s important to read these signals rather than simply following the narrative surrounding us.

In today’s discussion, we will explore why gold is considered the secret shield of every nation’s economy. We will also dive into some numbers about how central banks are ramping up their gold purchases and why you should consider gold as part of your investment diversification

Where is the market headed?

Market Overview

Where is the market headed? In my view, the market is in a very sound position. After some upward moves, we are currently undergoing a consolidation phase. Unless there’s a breakdown below recent lows, I believe we are in a good position. If you observe today’s move, the market came down to a breakout level, retested it, and then moved back up. Although it closed flat, no harm was done. This retest provides strength and suggests the potential to challenge previous highs in the coming days.

Nifty Next 50

The Nifty Junior is showing a similar pattern to what Nifty is likely to do ahead. After consolidating for a day, it came down and then closed at a recent high, signaling strength. On the Nifty Junior, the index closed up by 0.5% for the day.

Nifty Mid and Small Cap

Midcaps are continuing their steady performance, up by 0.28%, and have already gained nearly 10% since the bottom in mid-November. Small caps are also making gains, with an increase of 0.29%. The small cap rally looks almost like it’s being “stretched” upward, and there’s a sense of disbelief in the market. Less than a month ago, there was zero optimism, and now there’s a mountain of skepticism. Despite this, the market keeps climbing.

Nifty Bank Overview

Bank Nifty, up 0.3%, is now just a stone’s throw from its all-time highs.

Advanced Declined Ratio Trends

Overall, the market appears balanced, as evidenced by the advanced-decline ratio of 248 to 2475 stocks, showing equilibrium. The next 20 days may not bring much volatility, but I expect bigger moves to unfold in January. This could be triggered by news from the US, corporate results in early January, or even the build-up to the Union Budget in February.

Nifty Heatmap

In the Nifty50, it was a mixed day. HDFC Bank closed flat, while State Bank of India and Axis Bank saw gains of 0.6% and 1.1%, respectively. Bajaj Finance was up by 1.6%, while Reliance, Infosys, HCL Tech, and Wipro saw slight gains. However, TCS ended in the red. FMCG stocks remained flat, and there were small losses in UltraTech Cement, Maruti, Bharti Airtel, L&T, and Trent.

In the Nifty Next 50 space, Jindal Steel, Pidilite, LTIM, ABB, and Chola Finance saw good performance. Meanwhile, Adani stocks continued their downward trend after a brief recovery in November. Adani Green was down 3.3%, Adani Solar fell 2.2%, and Geo Finance was down 0.5%. LIC also had a significant drop, down 4%.

Sectoral Overview

Real estate continues to push forward. The sector gained 1.4% for the day and is now up 12.9% for the month. It has been the top performer over the past 12 months as well, with a 47.9% gain. Many investors may have missed the boat on real estate, both in stocks and on the ground, but it’s never too late to jump in. The PSU banks also showed recovery, up 0.5% for the day and 4.5% for the month. While energy, infra, consumption stocks, and commodities lost some ground, the market overall seems to be in a stable position.

Sectors of the Day

Nifty Realty Index

The real estate sector is close to its all-time highs, with stocks like Raymond, Phoenix Mill, Godrej Properties, SL Mahindra LifeSpace, and DLF all showing strong movements. If you’re looking at discretionary investing or trading, a strong sector like real estate can guide you toward better stock picks. For non-discretionary investors, like those following Weekend Investing strategies, these trends will naturally get reflected in your portfolio.

Stock of the Day

Raymond

Raymond has had a remarkable run, jumping 12% in a single day. It is now just 5% away from its all-time high, having surged from around ₹100 to nearly ₹1800 in a relatively short period. This impressive performance highlights the value of spotting the right stocks at the right time.

Story of the Day : Why gold is the secret shield of every nation’s economy.

The extent to which central banks worldwide are accumulating gold is unprecedented. This trend has not been seen in the last five decades. Central bankers—who have the power to print money—are investing heavily in gold to diversify their reserves and hedge against financial instability. These creators of paper money are accumulating gold on the side, signaling a clear vote of confidence in the metal’s role in the global financial system.

Gold has historically been the anchor of the monetary system. When the gold standard was in place, currencies were backed by gold. Even after the gold standard was abandoned in 1971, gold continued to act as a store of value. Today, central banks are stacking up gold because they view it as the ultimate hedge against economic uncertainty, inflation, and currency devaluation.

Central Bank Gold Reserves

Let’s look at the global gold reserves data:

• The United States has 8,000 tons of gold, though there is skepticism about whether it still exists in Fort Knox, as it hasn’t been audited in decades.
• Germany holds 3,000 tons, Italy and France have 2,500 tons each, and Russia is rapidly increasing its gold reserves at 2.3 thousand tons.
• China holds 2.2 thousand tons, though many believe it has much more than it publicly reports.
• India, which had around 560 tons just a few years ago, now holds 841 tons, steadily increasing its gold holdings.
• Other countries like Turkey, Poland, Portugal, Uzbekistan, and Kazakhstan are also buying gold in large quantities, along with developed nations like Singapore and Belgium.

This global gold accumulation shows that central banks still view gold as a critical asset in the monetary system. Despite the move away from the gold standard, gold continues to be seen as the anchor of all asset classes. It acts as a stable, reliable store of value that central banks turn to in times of financial uncertainty.

Gold’s Role in the Modern Economy

The modern economic landscape has been shaped by the abandonment of the gold standard in 1971. This allowed central banks to print money freely, leading to inflation and the devaluation of currencies. In recent years, the consequences of this unlimited money printing have become evident, with rising inequality and economic instability.

Gold remains the only asset that does not carry counterparty risk. Unlike money in the bank, stocks, or real estate, where ownership can be disputed, gold is an asset that you can physically own without any risk of counterparty default.

As the global economy faces increasing uncertainty, people will increasingly look for safe-haven assets. Gold, with its liquidity and stability, will continue to play a key role in preserving wealth.

The Importance of Gold in Your Portfolio

For individuals, especially in countries like India, gold offers a crucial hedge against currency risk. Most assets, such as stocks and real estate, are denominated in local currencies, which can lose value due to economic or geopolitical events. Gold, however, is priced internationally and can help protect against such risks. If the Indian rupee devalues, gold holders would still see their wealth preserved in real terms.

In the context of global economics, gold is increasingly being seen as a hedge against inflation, currency devaluation, and other systemic risks. Central banks are not just buying gold for diversification; they are doing so because they believe it is the ultimate protection against financial instability.

As more and more economists and analysts recognize the value of gold, their recommended allocation to gold is rising. Traditional portfolios with 1-5% gold exposure are now being re-evaluated, with some suggesting a 15-20% allocation, or even more in certain cases.