DON’T LET THE GLITTER OF GOLD BLIND YOU
Capitalise on the surge in gold prices, but it is best to limit exposure to 5-10 per cent of your portfolio
Gold has had a dream run of late. Starting from a spot price of Rs 31,641 per 10 grams on April 17 at the Multi Commodity Exchange (MCX), it reached a high of Rs 39,823 on September 4, before correcting itself to Rs 37,855 on September 17. The sharp rise in value has made many investors ponder whether to hold onto their gold investments or sell to take advantage of the surge. Those who stayed away from gold till now are wondering if they should course-correct and take the plunge. Here are a few strategies to guide you through investing in gold.
WHY THE SURGE
Traditionally, investors tend to fall back on gold during times of economic turmoil. “Given the ongoing economic uncertainty globally, there has been an increasing demand for alternative asset classes, such as gold,” says Narinder Wadhwa, president, Commodity Participants Association of India. When big players, too, start moving their investments to gold, it impacts demand and supply, and causes a sharp price rise. “World Gold Council data shows the central banks bought a net of 224.4 tonnes of gold in the April-June quarter of 2019 and 374 tonnes in the first half of the year. This is their biggest purchase in the first half of a year in the past 19 years,” says Ankur Maheshwari, CEO, Equirus Wealth Management. Retail investors take cue from big banks and buy gold, which further increases demand.
SELL OR HOLD?
Experts do not rule out some more gains from gold in the short to medium run. “Easing liquidity conditions and cost of capital should sustain the healthy price momentum in gold. This rally has more upside before it corrects,” says Rajesh Cheruvu, chief investment officer, Validus Wealth. If the value of gold in your portfolio has gone up considerably, you may liquidate partially to lock in some gains. If you are heading close to your financial goals, you may use this window to sell a part of your gold investment.
GOOD TIME TO BUY?
“With increasing geopolitical uncertainty, from the US-China trade war to Iran and Brexit, gold prices may climb further,” says Wadhwa. Buy gold with a longterm investment horizon, of five or more years. “In the short term, gold may touch $1,600-1,650. In the domestic market, the price may touch Rs 40,000-42,000 per 10 grams,” says Gupta.
DON’T GO OVERBOARD
Gold should be used only as hedge and not core investment. “One should keep only a small part, say 5-10 per cent, in gold to balance the portfolio,” says Saurav Basu, head, wealth management, Tata Capital. Always buy gold in parts rather than lump sum in order to manage the volatility better. Many investors disheartened with the correction in equities are eyeing gold. However, changing asset allocation when the market is volatile is not advisable. ■