Gold’s glitter is for long term

Gold’s glitter is for long term

You can hedge your losses if risky assets in your portfolio run into trouble

It appears that gold may have lost its Midas touch, but that is only a blip. Gold will always be worth its weight in the long run and is a “must’’ in your portfolio, especially as a risk-averse hedge against other more riskier investments, according to experts. Given the bearish outlook for the yellow metal, the question is whether or not one should invest in gold? Up until 2013, gold was considered a safe bet as the precious metal had enjoyed a bull run for more than a decade. Gold prices increased from Rs 6,250 per 10 gram on commodity bourse MCX in January 2004 to Rs 35,074 per 10 gram in MCX in August 2013. But the subsequent crash in prices bust the “safe haven’’ myth. Despite this, experts feel gold is still the best bet as a risk averse investment. “It’s a must in your portfolio. Think of it as an insurance,’’ says Naveen Mathur, associate director, commodities and currencies, Angel Broking. For instance, at present, the equity markets are on an upswing and gold may appear to have lost its sheen. “If the markets are in trouble, then the risky assets may not perform greatly. But you can hedge your losses with gold in your portfolio,’’ says Mathur. Gold is still seen as safest asset with the lowest risk when compared with other investments. “The `low-to-negligible’ co-relation with other asset classes like equities and debt provides gold a characteristic of an anchor even when the other two assets may not be performing well. Thus, gold helps stabilise the overall portfolio and provides a possibility of growth even in a recessionary environment,’’ says Lakshmi Iyer, chief investment officer (CIO) (debt) & head products, Kotak Mutual Fund. Investors who have been waiting for a drop in prices should keep in mind that gold prices could firm up in the coming days. Following the jump in gold imports and a widening current account deficit, the Reserve Bank of India (RBI) is said to be looking at imposing curbs on imports. The import curbs coupled with the domestic demand for occasions like weddings could lead to a marginal increase in prices. “Looking ahead, while (international) prices stay below $1,200 the broad sentiments are on the downside, but bargain buying and probable demand from India is likely to take prices higher. In the domestic market, a mild positive move to Rs 27,300 per 10 gram is anticipated initially, which if broken would take prices higher towards Rs 28,000 levels later,’’ says Hareesh V, research head / senior analyst, GeojitComtrade Ltd. The best investment strategy for investments in gold is a “staggered approach’’ with regular purchases of small quantities as it helps to average out the cost. For best results, gold should comprise 10 to 20% of your portfolio, say experts. “Gold has intrinsic value. So anytime is a good time to purchase gold,’’ feels Mr C K Venkataraman, CEO, jewellery division, Titan Company. And now that you may have made up your mind to invest in gold, you could invest in either physical gold, that is, gold jewellery, gold coins or bars or Gold ETFs (exchange traded funds). “If you are buying gold purely as an investment, then it is better if you invest in gold ETFs rather than physical gold,’’ advises Mathur. The advantages are that physical gold involves the risk of theft and misplacement and you could be cheated on the price by your jeweller. The ETFs are safer as you can buy and sell them on exchanges and do not have to incur charges for safe keeping say locker or 0insurance charges or making charges in case of jewellery.