Whenever there is uncertainty and volatility in the stock/debt markets, people’s attention turn to gold – especially if the yellow metal’s price seems to be on the uptrend. As it is now. So, here is a sample question from our customers and our response to it.
Can you please give your subscribers a review of Gold as gold prices are rising in this testing times of corona? Should we invest in it now? Is it a good time?
Gold has been a top performing asset class in the last 3 months, rising about 22 per cent in Rupee terms in this period. The recent performance goes to reiterate gold’s role in protecting your portfolio value when every other asset – stocks, bonds and commodities – are in turmoil. If anything the COVID crisis has reiterated the case for allocating upto 10% of your portfolio to gold, particularly if you own market linked assets like equities or mutual funds, as it seems to spiral up when unquantifiable risks loom.
The COVID uncertainty apart, the global central bank response to this crisis also strengthens the case for owning gold, with governments blowing deficit targets and engaging in unchecked money printing.
However, weighed against all this, gold is not cheap for Indian investors at this juncture with both global price rise and the Rupee depreciation pushing prices beyond Rs 42,000 (24 karat)/10 grams. If you don’t own any gold in your portfolio, you should acquire some via SGBs/gold ETFs, while not buying all at once. If you already own an allocation, wait for dips to accumulate.
Editor’s note: It would be worth your while to read our earlier perspective on gold that we wrote in the beginning of the year.