But experts believe there’s never been a better time to invest in gold, given the correction in prices of the precious metal, and
expect demand for gold, both from a consumption and an investment perspective, to continue to grow, buoyed by an increase in purchasing power, ease of investing, and consumer sentiment.
In a conversation with ET Digital on the ‘Future of Gold Investing in India: Outlook and Trends’,
Santosh Joseph, Founder and CEO of Germinate Investor Services, and
Ghazal Jain, Fund Manager – Alternative Investments at Quantum AMC, mentioned that investors view gold investing less from a returns perspective and more from one of ensuring a long-term
diversified investment portfolio.
Future of gold investing in India. Outlook and Trends
Gold – long considered a hedge against inflation – has been weighed down in recent months as central banks around the world raise interest rates to fight inflation amidst a surge in the US dollar. So what does this mean for the future of gold investing in India, which is the second-largest consumer of gold? Will the festive season and upcoming wedding season bring back some of the sheen for the yellow metal? What trends are expected to dominate the performance of gold as an asset class going forward and what investment strategy should investors adopt, going forward? We discuss all this and more in this specially curated session on the Future of Gold Investing in India: Outlook and Trends, with industry experts.
“I think it’s important that we look at gold as a strategic asset class, just as we do with equities. What is important is that you have gold as part of your asset allocation from a long term and strategic point of view. Only then, you’ll be able to actually enjoy its benefits as a portfolio diversifier, instead of tactically chasing the asset class every time the equity markets are going through a tough time,” Quantum AMC’s Jain said in a virtual interaction with Miloni Bhatt, Editor – Digital Broadcast, EconomicTimes.com.
Gold is considered as one of the effective measures against inflation if one has invested for long term, while higher interest rates increase the opportunity cost of holding zero-yield bullion.
India is the second-largest consumer of gold, with an average annual demand of about 800-850 tonnes, of which 80% is used for jewellery and the rest in the form of gold coins and other industrial uses. Buying gold on festivals like ‘Diwali’, ‘Dhanteras’ and others is considered auspicious in the Indian traditions and that is why gold prices move up during the festive season.
“Going forward, even though we see inflation being sticky and at a high, the consumption for jewellery is going to continue because people are going to see inflation, even in the price of gold, as a reason to buy ahead of time; the typical household will say, if gold is going to go up, let me buy today. Or if gold is available at this price, let me buy it before it goes higher,” Germinate Investor Services Founder and CEO Santosh Joseph said.
On October 25, gold prices edged higher, following the pullback in the US dollar, while investors awaited further cues on the US Federal Reserve’s interest rate-hike path. The Fed will go for its fourth consecutive 75 basis point interest rate hike on November 2, according to economists polled by Reuters, who said the central bank should not pause until inflation falls to around half its current level.
“While the domestic economy is looking robust, Indian equity markets are vulnerable to geopolitical developments, oil prices, capital outflows, rupee depreciation… This will be a challenging period for all asset classes but risk assets like equities and bonds have the potential to suffer more, making gold relatively better place. So yes, it is a good time to invest in gold. Given that prices have corrected off late, I think now’s a good time for investors to start accumulating,” Quantum AMC’s Jain said.
Jain’s advice to young Gen Z or millennial investors, who have just forayed into investing in the post-pandemic period, is two-fold:
●Pay heed to the investing patterns of your elders when it comes to gold and ensure you invest 15-20% of your portfolio in the precious metal
●Explore more efficient, financial long-term investment avenues like gold ETFs
The general relationship between gold and the stock market has historically been inverse. However, over the past few months, gold ETFs have been witnessing outflows even though the market is volatile. Jain explains, “The outflows that we are seeing is typical investor behaviour – investors who are moving out of gold the moment they see the equity markets doing well. In September, gold ETFs attracted flows of Rs. 300 crore plus, because equity markets were down. If volatility continues, gold and gold ETFs could see renewed interest.”
Over the last decade, annualised returns from gold have been around 10%, while the CPI index compounded at about 6-6.5percent over the same period, with gold prices keeping pace with real increases in cost of living over the long term, said Joseph, while noting the different kinds of strategic benefits that gold brings to the table.
“From an India perspective alone, there’s a great advantage (in investing in gold). And not to forget, for an Indian investor, having gold is a direct benefit of the dollar appreciation and rupee depreciation. So, when we spoke about the 10-year return, most of it has come because of the rupee depreciation against the dollar. So today, if you and I own gold, we are indirectly having access to the dollar asset,” Joseph added.
For investors keen to invest in gold, the
Quantum Gold Savings Fund (QGSF)enables investors invest in a gold ETF through a SIP or STP of as little as Rs. 500 per month. QGSF invests in units of
Quantum Gold Fund – an Exchange Traded Fund (QGF), which in turn invests in physical gold.
Here are 5 reasons to invest in QMF’s Quantum Gold Savings Fund:
1.Helps diversify your money in gold, an important tool for diversification
2.Enables investments in gold through a SIP or STP of as little as Rs. 500 per month
3.No need to open a demat account as is the case with Gold ETFs
4.Takes care of all risks of storage and safety for a minimal expense ratio
Ensures quality of gold is up to the mark.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.