In current market scenario and global events, the portfolio allocation for gold should be 10-15 percent to get maximum relative advantage on return on investment (ROI), Tapan Patel, Associate Vice President, LKP Securities said in an interview to Moneycontrol’s Sunil Shankar Matkar.
Is gold really a safe bet as we always see whenever global turmoil happens, gold gains ground? Is gold really a better option than shares?
It has been seen from historic price movements that Gold has attracted higher investment in times of market turmoil whether be it equity market crash or geopolitical tensions or war like situation.
As the Gold has no default risk or counter-party risk and has the acceptance universally, it has been proved the best option for investors to make their investment safer in times of high market uncertainty hence making it safe haven asset.
The purchasing power of Gold relative to the inflation gives advantage to the investors to restore the value on liquidation once the tides of global turmoil settles down. Hence, I believe that Gold has still the higher edge against other assets in the events of global turmoil.
Should gold be a part of your portfolio and what percentage one should allocate for gold?
Yes, I strongly recommend the allocation of Gold investment in individual portfolio giving it advantage of diversification in market uncertainty and economic slowdown. The combined portfolio may give you higher returns against investment in only one asset. Looking at the current market scenario and global events, the portfolio allocation for Gold should be 10-15 percent to get maximum relative advantage on return on investment (ROI).
What is your gold outlook for FY19 or till next Akshay Tritaya?
Gold prices are trading in upper range of USD 1,300-1,360 an ounce for current year matching parity with equity markets where we have seen certain global events and weaker dollar supporting gold prices to trade higher.
The US govt policy and administration, geopolitical tension on North Korea, US China Trade war and tensions in Middle East are the recent supportive factors for rally in Gold prices for short term.
Looking at the long-term scenario, the pace of US Fed rate hike and the economic recovery in US and EU are still the decisive factors for Gold prices movement.
I believe Gold prices will continue to trade in upper range for FY19 considering USD 1,300/1,290 as strong support range while we can expect USD 1,370 as strong resistance and above that we can see USD 1,420/1,450 as immediate levels.
For investment in gold what should be better option - physical gold, buying gold in futures & options, investing in gold through Gold ETFs or buying gold through monthly scheme?
Investment in Gold is completely based on individual perspective and demand. In India, the very traditional way to invest in gold is to buy it physically and own it for long term. However, today we have many other options available to invest in Gold.
If we keep aside jewellery demand from house hold, owning Gold on paper can serve the pure investment requirement of individual portfolio. Investing in Gold through Gold ETFs, monthly scheme and newly launched sovereign gold bonds can be considered safer or lower risk baring options while buying gold in futures and options requires certain market knowledge of derivatives to understand the market volatility.
Hence, I think it is up to any individual on which option to choose for Gold investment as per the need where the product is underlined to the direct Gold prices fluctuation and hence the return on investment.
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