Gold purchased every year on Dhanteras during the last five years has managed to beat inflation even though the year on year returns were in single digits.
Thinking of investing in Gold but not sure because it has rallied 20 percent so far in 2019? Well, going by experts’ commentary, Gold still has its glitter left and should be part of your portfolio if not in physical form then in the form of Gold ETF.
And, no better day than Dhanteras to buy the precious metal. The Hindu festival is considered as an extremely auspicious day to make new purchases, especially gold in India.
People invest in the yellow metal as it is believed to bring prosperity. However, a sudden spike in prices might have hit sentiment but, from an investment perspective, Gold is usually considered as a good hedge against inflation and volatility.
Investors would have managed to beat inflation if they invested in Yellow metal in the last five years, data showed. Expectations are that domestic Gold could surpass 40,000 and hit Rs 42,000 per 10 gm in the next one year.
“Gold purchased every year on Dhanteras during the last 5 years has managed to beat inflation even though the year on year returns were in single digits. As on last Dhanteras, i.e till Oct 2018 the price ranged around Rs. 31600 per 10 grams compared to Rs. 27500 during Oct 2014, and Rs 40,000 on Sep 2019,” Sunilkumar Katke, Head – Commodities & Currency at Axis Securities Ltd told Moneycontrol.
“The rise seen in Gold translated into a yield of 20% in just 1 years’ time is the highest during the last 10 to 15 years’ time grabbing interests of allot of institutions and individual investors,” he said.
One should buy Gold in the physical form, or through Gold MFs or ETFs, or on derivative platforms on this Dhanteras. “The ongoing uncertainties still unresolved one can expect the prices to move northward from current levels of $1,490 to about $1,750 at Comex and Rs. 38,000 levels per 10 grams to Rs. 42,000 mark in months ahead domestically,” added Katke.
Gold has witnessed a strong run with healthy returns in the past one year. This has been largely due to rising concerns of global economic slowdown, trade tensions between US-China and falling bond yields.
All this has led to investors moving a portion of their capital from risky assets to a safe haven like gold. Which brings to our next questions — what percentage is ideal for Gold investment?
Going by the volatility in the external environment, it would be healthy if investors could keep 5-10 percent of their portfolio in Gold.
“In India, depreciation in INR has also contributed to the increase in gold prices, which touched lifetime high recently. Investment in gold should be looked for safety and stability rather than yielding strong returns,” Ajit Mishra, VP Research, Religare Broking, told Moneycontrol.
“From a portfolio building perspective, Gold should form 5-10% of the overall investment portfolio. The investment proportion could be higher (10-15%) if the investor wants to build a conservative portfolio,” he said.
Mishra further adds that, between physical gold and gold MF, it is better to invest via gold MF as it offers a number of advantages like high liquidity, no problem of adulteration or impurities and lower maintenance cost whereas brokerage cost is lower at around 0.5-1 percent.