Mostly, Gold is considered to be a safe investment product. However, like any other commodity, it also has its cyclical woes. In the past few months, we saw that much of the global investment flow towards gold was triggered by the weakness in equity markets and the institutional investors were using the yellow metal to hedge their risks. Then, in just last few days, the exact reverse occurred. Oil fell to nearly $115 per barrel from a high of $147. Gold dulled almost immediately. Gold prices bounced back on the bullion market here on fresh demand from stockists, on the back of higher advices from the London metal exchange. Also, Gold prices fell at the Delhi bullion market on emergence of selling triggered by weak global trends. Standard gold and ornaments tumbled by Rs. 105 each to Rs. 11,915 and Rs. 11,765, respectively, per 10gms.
Looking at the above mentioned situation, you can now start taking advantage of the price swings. In order to take this approach, it would be much easier to take the mutual fund route which offers SIP (Systematic investment planning) or STP (Systematic transfer planning). Similarly, gold – traded funds can be another option, but it requires a demat and trading account for investments, unlike gold mutual funds where only a PAN card is a necessity.
After looking at the present gold scenario, fresh investors will have to look at gold in a different way. In my opinion, investors should use the systematic approach. But one needs to look at gold along with other products too. In this era of electronic fund transfers and auto debit facilities, gold’s liquidity factor is no longer an USP. Gold should not be an option purely for its allocation should be decided by their liquidity needs and timing. Hence, those who are sitting on a large corpus of wealth can look at an allocation of 5 to 10 percent for gold as this will bring stability.
It is a myth to say that gold is a safe investment product. Gold investment is good but it is not 100% full proof. Gold should be considered as any other investment commodity. Those who are having lots of wealth can look at an allocation of 5 to 10 per cent for gold as this would provide stability. On the other hand, an investor with an investment horizon of a couple of decades can afford to skip the option of gold. The reason behind it is that it does not offer high returns over a long period of time. However, the medium – term outlook for gold is likely to positive.
I would like to end this article by stating that you should invest in gold, only of you want returns better than debt instruments.
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global investment flow towards gold was triggered by the weakness in equity markets and the institutional investors were using the yellow metal to hedge their risks.
If we see the History then we came to know that the Gold was used as money in earlier times before 2nd world war. If someone needs financial gain then must invest in Gold.
Certainly there is no sense to put up all money in gold. But diversification of portfolio is necessary. Gold bullions should be in a portfolio of each investor.
Thanks for the great reading, we buy Gold Bullion in a recession. I will pass this on to our Ira clients to read.
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