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

India Today - - REPO RATES - —Naveen Ku­mar

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. ■

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