Post the US Fed stimulus, the interest price atmosphere has remained benign but with the threat of inflation nonetheless on the horizon, gold costs have rallied this year. But, of late, the secure haven of investments, gold, appears to be facing a rough patch amidst the news of the COVID-19 vaccine. After reaching a higher of practically Rs 56,000 per 10 grams, gold costs are at the moment hovering about Rs 50,000.
So, what could have led to the fall in gold costs in India in current months? “With the global lockdown due to the COVID-19 pandemic, there was a flight to safety towards gold, resulting in the steep increase in gold prices and steep fall in equity, bond and FD returns. However, with the recent announcement of the impending launch of a vaccine against COVID-19, there has been some correction in the gold prices,” says Sanjeev Agarwal, Director, Dvara IntelligentGold.
Predicting the future gold cost could be a futile physical exercise as numerous worldwide variables could be at play. However, there are adequate probable grounds that could indicate a increasing trend in the gold cost. “Due several current economic conditions such as the slow recovery of the manufacturing sector globally, the investment demand for gold will continue for some time. As per the analysis by several Bullion Gurus, gold is expected to move up to a level of US% 2,100 (equivalent to about Rs 56,000 per 10 gm). The lifetime high levels of US$ 2089 per oz was reached on August 2020,” informs Agarwal.
Money lying in bank savings account more than a extended period of time is definitely not the suitable way. Letting the funds earn a superior threat-adjusted return could be looked at by the investors. Agarwal explains with an instance – “Over the last 10 years, gold prices in Indian Rupees has increased by 150%. For instance, if a person saved Rs 1,00,000 in gold in 2010, he would receive Rs 2,50,000 if he sold the gold now. But if the same amount of Rs 1,00,000 was lying in a Savings account, with interest it would amount to about Rs 1,50,000 approx.”
But, naturally, all your savings can’t go into gold. One desires to diversify savings across asset-classes such as equities, debt, true estate and gold. “The major benefit of saving in gold is that it protects the savings from erosion of the purchasing power of goods and services over decades. As per the analysis done by World Gold Council, with savings in 100 gms of gold you could buy the same quantity of products or services that you could have bought 300 years back. Hence it is recommended that about 20% of the saving is in gold to protect the savings from erosion in the purchasing power and protect the savings portfolio from the volatility of the stock markets,” says Agarwal.