Gold is Down but Waiting to Rise & Shine?

Posted On Wednesday, Mar 17, 2021


Every asset class goes through its own cycle. There are certain periods when the economic environment favors the growth of a particular asset class and there are times when it doesn't. This generally, doesn't impact the long-term credibility of the asset class.

In the recent past, gold has seen a dip in its prices - leading to investors from both sides questioning whether it is a good choice of investment. Gold, with its price correction, is currently in the centre of attention with a divided audience. Those that recognize the intrinsic qualities while others that question its store of value for the near term.

How does Quantum's Fund Manager see the impact on gold for the near term and its future?

Chirag Mehta, Senior Fund Manager, in his latest commentary on gold gave his view - 'Use this correction in gold prices to build your allocation'. Gold has historically had a low correlation to equities. Last year, when the economy was in a deep financial crisis, gold played an important role in portfolios diversification. As the macroeconomic situation developed, we saw it playing the role of a risk-reducing return-enhancing asset.

So, what has led to a correction in gold now? And what does the future hold for the yellow metal?

The Golden Truth? There are several factors that can impact Gold's outlook:

Near Term - Headwinds   Long Term - Tailwinds  
Improved EarningsRising deficits and debt
Reducing Coronavirus casesDelay in vaccine distribution, slow withdrawal of lockdown and social distancing protocols
Impending fiscal stimulusLower interest rate and rising inflation
Strengthening dollarCurrency debasement
Economic Recovery ParametersAccommodative and easy fiscal and monetary policies to continue
Adding downward pressure on pricesGold may continue to be a risk-reducing, portfolio enhancing asset

Improved earnings, reducing coronavirus cases, impending fiscal stimulus, strengthening dollar, and indicators suggesting an economic recovery are proving to be headwinds for gold, adding downward pressure on prices.

However, uncertainty is still looming around. The longer it takes for vaccine distribution, the slower lockdown restrictions and social distancing protocols will be lifted, and the longer for the economy will come back to normalcy. This will ensure easy fiscal and monetary policies will continue. This is good for gold.

The macroeconomic vulnerabilities like rising deficits and debt, lower interest rates, rising inflation, bursting of asset bubbles and currency debasement warrant an allocation to gold which remains an effective portfolio diversifier. One must understand that investing in gold is not just about the potential risk adjusted returns but it is also about minimizing risk to the downside by diversification.

In addition, gold will maintain its traditional role as a store of wealth, and may at least keep pace with inflation to preserve purchasing power of capital.

Why investors should say YES to Gold

While there are many ways to have Gold in your portfolio, Gold ETFs or Gold Mutual Fund is a convenient and innovative way to invest rather than buying in physical. Here are some parameters to evaluate and understand.

Investment in Quantum Gold Savings Fund (QGSF) means opting for purity & convenience!
Explore how it compares with physical gold.

No.CriteriaPhysical Gold (from Jeweler)Quantum Gold Fund invests in Physical Gold
1Purity of GoldCan be adulteratedSure; 955 purity Gold. Probably the only Gold Fund which undertakes purity test of the gold held by the fund
2Availability of Standard PricingMay differ from jeweler to jewelerYes; linked to International Gold prices
3Premium paid over the gold priceHigh as making charges and profit margins includedNo premium over the prevailing market price of Gold
4ConvenienceLow as physical movement and transfer is involvedHigh as the assets are held in a Demat account
5Storage RequirementsHigh as it is in physical form; locker or safeLow for the investor, it is stored in a Demat account
6Security of the assetInvestor is responsibleFund house takes care of this
7Resale ValueGenerally at a discount; making charges are deducted againEasily liquidated at a value close to the prevailing price of gold
8ComfortInvestor has to go physically to the jeweler to buy goldInvestor can purchase from the comfort and safety of their home, 24x7 Online.

Invest in Quantum Gold Fund as you don’t have to worry about purity, storage, making charges/premium and insurance of gold. Each unit of a Gold ETF represents ½ gram of 24 carat pure physical gold. For investors looking for a more disciplined form of investment can also opt for an SIP.

An allocation of just ~10 - 15% should help you sail through future crises as the yellow metal plays a stabilising and diversifying role in your investment portfolio.

Product Labeling
Name of the SchemeThis product is suitable for investors who are seeking*Riskometer
Quantum Gold Fund

An Open Ended Scheme Replicating / Tracking Gold
• Long term returns

• Investments in physical gold.
Quantum Gold Fund
Investors understand that their principal will be at Moderately High Risk
Quantum Gold Savings Fund

An Open Ended Fund of Fund Scheme Investing in Quantum Gold Fund
• Long term returns

• Investments in units of Quantum Gold Fund - Exchange Traded Fund whose underlying investments are in physical gold.
Quantum Gold Savings Fund
Investors understand that their principal will be at Moderately High Risk
Quantum Tax Saving Fund

An Open Ended Equity Linked Saving Scheme with a Statutory Lock in of 3 years and Tax Benefit
• Long term capital appreciation

• Invests primarily in equity and equity related securities of companies in S&P BSE 200 index and to save tax u/s 80 C of the Income Tax Act. Investments in this product are subject to lock in period of 3 years.
Quantum Tax Saving Fund
Investors understand that their principal will be at Very High Risk

* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
The Risk Level of the Scheme in the Risk O Meter is based on the portfolio of the scheme as on February 28, 2021.

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

Mutual fund investments are subject to market risks read all scheme related documents carefully.

Please visit – to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

Above article is authored by Quantum.

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