Given the rising gold prices, should you still include it in your investment portfolio?
gold prices surged to their peak since May 16, propelled by a dip in the US dollar. The dollar experienced its lowest point in almost three months against a collection of major currencies, enhancing the appeal of gold for investors using alternative currencies. Furthermore, the anticipation that the US Federal Reserve might initiate monetary policy easing earlier than anticipated contributed to the upward momentum in gold prices.
A devalued dollar and reduced interest rates generally favour gold, as it becomes a more cost-effective investment for traders and diminishes the associated opportunity cost. In light of the significant increase in gold prices, is it still prudent to include gold in your investment portfolio? The response hinges on the elevated gold prices, which have not only outpaced inflation but have also played a role in building a substantial corpus for numerous individuals. Over extended investment horizons, gold maintains its purchasing power.
As an asset class, gold has consistently yielded returns that surpass inflation; the greater the inflation, the more substantial the returns. To understand how gold can enhance the lustre of your investments, reflect on gold prices from two decades ago and then compare them with the current market rate. Now, contrast these with the interest rates offered by conventional savings instruments such as bank fixed deposits and other government-backed savings schemes.
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