Will gold return with its shimmer?
Gold emerges as a better performing asset in the past one year in comparison to other investments. Will it continue to shine?
- Jun 13, 2016,
- Updated Jun 15, 2016 3:21 PM IST
After languishing at the level of $1,200 an ounce for the majority of 2015, gold zoomed past the psychological barrier of $1,300 an ounce on May 8, 2016, pleasantly surprising investors. In rupee terms, it rose to Rs30,000 per 10 gm on May 6, 2016, from Rs26,000 in May 2015, translating into a return of over 10 per cent.
Although prices fell to around $1,200 on May 30, gold still remains one of the better performing assets in the past one year in comparison to other investments.
Having said that, gold has been a well-performing asset class over the past one year when compared to the average category performance of large-cap equity funds, which delivered a negative return of 2.1 per cent. Mid-cap funds gave a paltry return of 0.5 per cent during the period. The only category that did well during this period was debt funds, which gained 7.9 per cent.
Irrespective of the market direction of gold, an investor should ideally allocate 10 per cent to 15 per cent of his portfolio towards gold as it serves as a safe haven in times of uncertainty and also bears a low correlation with many other assets classes.
If you are looking at gold as an investment and not for consumption, consider investing into ETFs as it is the most efficient form of buying gold. There are no heavy premiums attached to its price or any making charges.
For long-term investors, it is best to stay invested in gold irrespective of price change as the benefits of averaging will be an important aspect for higher returns over a longer period. Systematic investment plans (SIPs) may be an ideal way of investing since they allow you to average your cost and build a corpus for the future. However, if you are looking to buy gold from a consumption point of view, there may be some divergence in prices considering it is affected by other factors such as government duties, making charges etc.
After languishing at the level of $1,200 an ounce for the majority of 2015, gold zoomed past the psychological barrier of $1,300 an ounce on May 8, 2016, pleasantly surprising investors. In rupee terms, it rose to Rs30,000 per 10 gm on May 6, 2016, from Rs26,000 in May 2015, translating into a return of over 10 per cent.
Although prices fell to around $1,200 on May 30, gold still remains one of the better performing assets in the past one year in comparison to other investments.
Having said that, gold has been a well-performing asset class over the past one year when compared to the average category performance of large-cap equity funds, which delivered a negative return of 2.1 per cent. Mid-cap funds gave a paltry return of 0.5 per cent during the period. The only category that did well during this period was debt funds, which gained 7.9 per cent.
Irrespective of the market direction of gold, an investor should ideally allocate 10 per cent to 15 per cent of his portfolio towards gold as it serves as a safe haven in times of uncertainty and also bears a low correlation with many other assets classes.
If you are looking at gold as an investment and not for consumption, consider investing into ETFs as it is the most efficient form of buying gold. There are no heavy premiums attached to its price or any making charges.
For long-term investors, it is best to stay invested in gold irrespective of price change as the benefits of averaging will be an important aspect for higher returns over a longer period. Systematic investment plans (SIPs) may be an ideal way of investing since they allow you to average your cost and build a corpus for the future. However, if you are looking to buy gold from a consumption point of view, there may be some divergence in prices considering it is affected by other factors such as government duties, making charges etc.