People hold on to gold for a variety of reasons. The value set for gold by people throughout the centuries perpetuates its worth. This yellow metal brightens our lives during tough times. Gold is a good portfolio diversifier and it hedges against inflation and deflation alike. And in the present situation having gold in your portfolio can mitigate the risk of inflation and uncertainties.
Gold rate as on 13 July 2020 is Rs.50,685/10-gram, which is more than double the value 5 years back which was Rs.24562/10-gram on 6 August 2015. This surge in price is due to the impact of COVID-19 and expectation of the US economic downturn. The further hike is expected if this current pandemic scenario continues.
Gold Investment Options
There are several methods by which you can own gold, some of the digital gold investments available in the market include ETF, SGB, gold mutual funds etc. Well, one should be well informed about every aspect of any investment they take up.
With various investment options available, one is free to choose that suits them best. Mostly people prefer to invest in physical gold like ornaments, gold coins etc which is a risky decision to take during this period. Also expenses on storage, making charges, GST can again reduce the returns. Of the digital gold investments, gold ETF’s are good. One can procure it according to future plans, as they are purchased in small quantities. No case of extra charges applies to ETF. ETF’s are highly transparent and preferable in terms of tax benefits. Returns will be less than an actual rise in price due to fee charged for asset management and additional charges in form of brokerage will be charged. Government of India launched sovereign gold bonds to limit the import of gold. SGB’s are available in the stock market and it offers a fixed annual interest on the investment, irrespective of the rise or fall of the price, which is not available in other schemes.
Instead of investing in gold in lump-sum, it’s better to invest a fixed amount a month or quarterly. Because the price of gold might rise or fall according to changing economic conditions, so if one invests in lump-sum there are chances to suffer from losses. Even though It’s good to include gold in one’s portfolio, it’s better to limit it to 10% as it is sensitive to economic changes. Even though the price of gold can be volatile in short term, its value can be maintained in the long term.
