The yield from gold funds offered by mutual fund houses has touched 27.65 percent in the 12 months ending August 23, outperforming equity and debt fund categories, according to data on Value Research.
What led to the rise in Gold prices?
Gold has a negative relationship with equity. In times of volatility or crisis in the stock markets, gold as an investment performs better than equity. In the last one year, Sensex has fallen a little over 8 percent.
“The credit events or crises in debt and higher volatility in equities have prompted investors to turn towards stable investments like gold,” said a fund manager from a bank-sponsored fund house.
“The US-China trade war, with new tariff announcements, has pushed gold high as investors rushed for safe-haven assets,” Pritam Kumar Patnaik, Head (Commodities), Reliance Commodities.
What you should do now?
“Since gold has a very strong negative relationship with equity markets, it makes sense to have some 5-10 percent exposure in gold ETFs or other investment products as a hedge,” a fund manager from a private fund house said.
Experts say gold prices will continue to rise on the back of geopolitical risks such as the US-Iran tensions and the US-China trade war.
Pritam Kumar Patnaik expects the current upward trend to continue for gold and silver.
“On the MCX, gold is likely to move towards 39,900 to 40,000 levels. Having said that, 38,800 and 39,000 act as a strong crucial support level for gold on the downside,” he said.
“It doesn’t make sense to invest in gold now because gold prices have gone up. For a conservative or moderate investor 5-10 percent allocation to gold is sufficient,” says Gaurav Monga, Director, PxG Consultants.
Source: Moneycontrol, ET