The Glitter of the Gold

Gold in Indian households is considered as an auspicious asset, which is passed down from generation to generation, and so, it has its emotional value too.

The last 5 to 6 months have seen a lot of volatility in gold prices, which crossed Rs 56000 in tandem with global trend, which has eased about 6% now.

Generally gold prices go up when the stock prices suffer and vice versa. This is because gold is always viewed as a safer investment option. When the economy slumps, people rush to invest in gold for safety.

Geo-political risks such as Indo-China tension has also increased the risk perception of investors. Infusion of liquidity by RBI has led to lower interest rates, which have made gold glittering in comparison to banks’ fixed deposits.

One more factor contributing to the gold rally is the advent of the gold fund or ETF (Exchange Traded Fund), due to which one can invest in gold with even small amount, that too without any erosion in the value or maker’s charge.

Now the question is whether households should buy gold jewellery in the time of volatility. I think it is better to keep a safe distance from fresh buying till the prices stabilise a bit.

However, from the investment angle, it is imperative to diversify the risk, and gold is one option. Around 10% of investment in gold is desirable in any form.

Though gold doesn’t pay any dividend or interest, its value increases with the passage of time.It is not going to lose its glitter.

–Kaushal Kishore