Wedding Finance

Gold prices are losing their shine – will they add any more glitter to your investment portfolio?

By Anshul STI (Update)

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Gold prices hit their lowest level in over 2 years amid choppy trading on Monday. So, is this a time worth investing in the yellow metal. CNBC-TV18 spoke to experts for an answer

Gold prices fell to a fresh 2.5-year low on Monday, weighed down by a strong dollar and the prospect of further interest rate hikes by the US Federal Reserve to tame inflation. In recent months, the yellow metal has remained quite volatile with a bullish bias as geopolitical tensions have gripped the world.

Inflation is still a concern, accompanied by a global economic slowdown that may push gold prices to lows of $1,600 to $1,590 per area ounce, experts say.

So in the current scenario where gold prices are trading lower than all-time highs, should you invest in it?

Most financial advisors say gold should always be a small but crucial part of your portfolio.

According to Nitin Thard, director of SafeGold, this is indeed a good opportunity for the bargain shopper to buy the dip, given the upcoming holiday season and weddings.

“Overall, the outlook for gold is positive over the long term,” he said.

Most risk averse investors look for safety, liquidity and returns before investing and gold has generated decent annualized CAGR returns over the past 10 years, making it a safe illiquid investment.

Here’s how gold has behaved over the past 10 years:

(Source: Bajaj Capital)

So what should be the investment strategy?

A short to medium term investment in gold should be fine, experts say.

“Like any other asset class, it is difficult and futile to time the market, whether it is gold or stocks. So the general rule for gold is to allocate up to 10 % of your savings/portfolio in gold-related instruments and stay invested.” to take advantage of the appreciation in the price of gold which tends to catch up with inflation,” said Anil Chopra, Group Director at Bajaj Capital.

Additionally, diversification is important due to the uncertain economic environment and stock market volatility.

For long-term financial goals, an individual should have adequate exposure to equities, but as we know investments in equities are associated with high volatility, investments in negatively correlated assets such as gold act as a hedge. against strong fluctuations in a stock portfolio.

So, you can consider investing in gold.

However, as experts say, the asset class should not be viewed as a primary investment vehicle; rather, it should be used for portfolio diversification purposes.

Where to invest?

Physical gold is illiquid and digital gold can be a much better alternative. Depending on the investment needs, investment horizon, risk appetite and budget, one can choose to buy Gold Sovereign Bonds (SGBs), Exchange Traded Funds (ETFs) or mutual funds (MF).

SGBs hold a clear advantage over other forms of gold investing. The price of SGB is tied to the price of 24k gold, and the discounted price of the latest slice of SGB is about the same as the price of physical 24k gold. Interest on investment and low transaction costs make SGBs more attractive.

Note to readers

The opinions and investment advice expressed by the investment experts on CNBCTV18.com are their own and not those of the website or its management. CNBCTV18.com advises users to check with certified experts before making any investment decisions.