Buying Gold in the time of Corona: What Lies ahead

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A lot has been going on across the globe in the last few days. Russia and Saudi Arabia coming head to head over Oil supply and prices. Oil prices undergoing a free fall. On top of that, travel bans put in place across the globe due to the on-going Covid 19 crisis. Stock markets in India, USA and other parts of the world have seen a bloodbath, wiping out investor wealth to unimaginable proportions and yet having no clarity when things will improve. When there is so much upheaval and uncertainty in the financial world, the world will always invest and trust in the one true investment vehicle: Gold. Hence prices have surged so quickly. Will these prices sustain? The answer is we don’t know yet. I believe there is bound to be some correction in the prices.

There is an exceptional amount of uncertainty from all aspects in our country right now. We are hoping that the lockdown will be lifted soon and the pandemic will be in control so that life, as usual, can resume. Anyone looking to buying gold should not heed to speculations in the market but invest only for a 3-4 year term. 3 years after the 2008 meltdown in the USA, Gold prices peaked to an all-time high. Which is why buying gold is and shall remain the best investment vehicle.

Why buying gold is still the best decision?

Prices still remain stable while other instruments take a nosedive

Gold prices in India since the beginning of the outbreak have remained between 41000 to 43000 for 10 grams, similarly, in the USA, gold rates have remained close to $ 1600. Analysts are of the view that a lot of mutual funds, FIIs have had to liquidate their gold holdings to make up for their losses on the stock market. That is why gold prices have not shot up because there is a lot of selling pressure as well.

Demand always on the rise

In 2008, we had a major financial crisis, this time however our problems are compounded as it’s not only a financial crisis but also a major health crisis. Once the situation on the health front stabilizes, Gold will be the only asset which will maintain purchasing power, that’s why you will see an increase in the demand for gold.

Adornment and investment value

I strongly believe that consumption of precious metals and jewellery in India is not restricted to adornment but also for investments. India believes in buying gold and other precious metals which also have a strong cultural, societal as well as status led significance. Jewellery is also very important from the point of view of religious days as well as religious festivals. Jewellery buying in India will not be impacted by this.

In fact, more and more people will increase the level of Gold investments in their portfolios. If today an investor has 10% of precious metal investments in his/her portfolio, the same figure will reach up to 30% in the coming days. Gold will become a very serious alternative investment vehicle. Gold will become extremely attractive to those who have been investing in real estate and mutual funds.

What is the best way to invest in gold?

In regular intervals

Buying gold in a systematic manner no matter what the form is always advisable. Indian investors should also start investing in gold in the SIP format, i.e. save every month, every quarter and invest with your trusted jeweller.

In physical form – Jewellery or bullion

However, one should prefer to buy gold in physical form. One can keep buying gold at regular intervals in bullion or even jewellery form since making charges in India are not very high unlike in the west. Customers can also opt for buying online but the same should be only with trusted players who are reliable. Investment in gold should not be for the short term but for a minimum of 2-3 years horizon to avail great returns.

Authored by-Saurabh Gadgil, Chairman & Managing Director, PN Gadgil Jewellers Pvt Ltd

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