Earlier this week, gold prices hit a record high of INR 48,589 for 10 grams. The coronavirus has created a myriad of uncertainties and insecurities. Consequently, gold is likely to now shine during the pandemic. Gold MFs have delivered 40.39% returns in just one year, having beaten all other asset categories.
IMF also slashed its 2020 global output forecasts. Now, wider damage is seen than what was first thought of. From the previous estimates of -3%, the world economy is now expected to shrink at a rate of 4.9%. This will weaken the overall market. This is precisely why gold is going up.
Global uncertainties are keeping gold up at the moment. Its previous track record also makes for a strong case for present investments. Even at these levels, gold is a good investment, thanks to its strong track record.
In the last decade, gold has seen very little depreciation. As an asset class, gold funds have no default risk or no credit risk. Inflation in the country has been at 7-8%, and gold has managed to give equivalent returns. And because gold managed to prove its worth over the years, we are seeing a lot of buying and inflows right now.
However, as per experts, gold will be very volatile in the coming days. For the need of cash, investors are now selling gold along with other assets classes as well. On the domestic front, prices are hovering in the range between INR 47.950 and INR 48,300.
Gold will continue to enjoy the benefit of the doubt until there is no clarity on the ongoing pandemic. As per data, even in 2001 and 2008, gold bounced back the first after the economic crisis. Right now is a good idea to invest in gold funds via SIPs.
When gold bottomed in 2001, it offered 240% returns. In 2008, it gave 170% returns. However, investors should not go overboard. 10-15% only should be allocated to gold funds or ETFs. If you do have gold funds, invest via SIPs. Simply because one class is doing well, you do not have to put all your money into it. Also, it is very important to have cash with yourself in the present scenario. Steer clear from taking any risks on your contingency fund right now.