Posted On Monday, Oct 05, 2020
When it comes to equity, investors understand volatility i.e. fluctuations in price.
No matter how much volatility there is, investors somehow never stop distancing themselves completely from investing in equity mutual funds or even direct equities.
So why it is that things are different when it comes to Gold.
Gold hit an all-time high of $2,075 per ounce at the start of August. On its journey up, as it usually happens, demand for Gold was solid.
But then there was a correction and Gold prices fell 7% in a week. And what happened post that?
Investors shied away from Gold. Perhaps you did too.
Don't forget, Gold like other asset classes will have its share of ups and downs.
What is more important to understand is that there are only three things to focus on when it comes to Gold -
● You do not invest in Gold for 1 week, 1 month or 1 year...you invest in Gold for safety during unforeseen circumstances.
● If you want Gold to earn you a return, keep the long term view on Gold in mind.
● You need to allocate prudently to Gold. For many, only 10 - 15% allocation to Gold could suffice. Yes, we are not suggesting you go overboard with Gold.
Treat Gold as a strategic member of your portfolio that generally performs well and lowers portfolio risk during the uncertain economic times.
We suggest not going overboard with Gold in the current environment.
Similarly, temporary price corrections shouldn't be triggers to sell.
Like what we witness in every bull market, it's more likely a corrective, consolidative phase.
The surge in Gold from 2000 to 2012 had seven reasonable sized corrections and so could be this price corrections as well.
Gold holds strong potential over the long term as fundamentals are stronger. That's because the macroeconomic tailwinds that instigated the bull market in Gold in the first place, are very much intact, and are expected to stay that way for the long term.
With the economic outlook looking grim, it indicates that monetary and fiscal policies around the world will continue to be accommodative to boost GDP growth.
As the macroeconomic situation develops further, we expect Gold to play a risk-reducing return-enhancing role in the long term.
Watch Chirag Mehta, Fund Manager, talk about his long term view on Gold here...
Remember, price corrections are temporary and are potentially good entry opportunities for those seeking to establish long term investments in the precious metal.
Given the fast unfolding macro-economic scenario where economies are trying to get on a road to recovery, the cost of economic damage remains a big unknown. Central banks remain committed to support economies at all costs. This is indeed a big plus for Gold.
Investors who don't have enough allocation to the tune of 10-15% of their portfolio, we suggest consider making up for that deficit.
Editor's note: To know more about investing in Gold (adding to your Gold investments) write to us at [email protected]
Or give us a missed call at +91-22-68293807 and we will call you back. We will be happy to assist you.
Data Source: World Gold Council
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