One of the largest financial assets in the world, gold has an average daily trading volume of over $183 billion. Due to the Covid-19 virus outbreak and the ensuing meltdown in the equity market last year, gold prices sharply increased, reaching heights of Rs 57,000 per 10-gram. The price of MCX Gold has recently been hovering around the Rs 46,000 mark, with support coming in at Rs 45,850 – 45,600 and resistance coming in at Rs 46,370 – 46,700. This decline from record high values of Rs 56,000–57,000 is seen as a buying opportunity for gold. Many investors believe gold is a good investment, especially for those who have a reduced risk appetite, because they are alarmed by the “overheated” equity markets.
In addition, the profitability of digital or paper gold is an added benefit, particularly when it comes to Sovereign Gold Bonds, which give an additional return of 2% annually on investment on top of the return realized through rising gold prices.
While gold has traditionally been seen as a secure investment, digital gold has been making its way into Indian homes, according to Ashraf Rizvi, founder and CEO of Gilded.
Customers who invest in digital gold will be able to hold Swiss gold as well as a secure asset that will generate long-term returns and increase wealth. Although digital gold became more popular during the pandemic, real gold will continue to lose ground to it as an investment, he predicted.
The equities markets, gold, and the ClearTax industry are all inversely related, according to founder and CEO Archit Gupta. “When the Covid-19 outbreak broke out, the stock markets crashed, and gold prices immediately rose. But when people adjusted to the new normal, the equity markets stabilized and the price of gold declined, he said.
But he went on to say that gold jewelry shouldn’t be thought of as an investment because it entails significant extra expenses like manufacturing and waste fees. He suggested that you put your money into gold ETFs instead. In addition to real gold, there is also the option of gold mutual funds. One can think about dedicating 10% to 15% of their portfolio to gold in all its forms.
In particular in the Indian context, gold has long been viewed as a “safe haven” asset, according to Nikhil Kamath, co-founder and CIO of True Beacon and Zerodha. “However, the price of gold is affected by the market and a variety of other external variables, making it an inherently riskier investment than FDs, PPFs, etc.”Investors can consider gold if they are okay with a reasonable amount of risk, want to diversify their holdings, and need a hedge for other components of their portfolio,” he said.
The metal should be purchased as a hedge to other investments rather than only for profits, he continued, even if gold is seen as an asset that can beat inflation. Although relatively stable and effective as a buffer against other asset classes like equity, he noted that long-term returns are often rather modest for gold, a commodity that performs well when uncertainty is high.
According to Nish Bhatt, founder and CEO of Millwood Kane International, the yellow metal has been losing shine in recent months after making outstanding advances in 2019 and 2020. With the worldwide vaccination campaign and the prospect of an economic rebound, money is moving to other high return-yielding assets. “Gold is anticipated to trade sideways going forward, with expectations heavily reliant on how the pandemic is managed and how the US currency moves. Investors are recommended to establish a diversified portfolio with up to 10-15% of their assets in gold, depending on their level of risk tolerance, he said.