Gold demand to rise this festive season despite geopolitical uncertainties: Study

financialexpress.com:

Gold is an efficient asset class that provides safety and acts as an efficient hedge against inflation. Hence it is better to invest in a portfolio that includes gold, says a study conducted by Windmill Capital, a wholly-owned subsidiary of smallcase Technologies Pvt Ltd. The study indicates that demand for gold is likely to remain robust during the festive season, especially Diwali.

The recent study by Windmill Capital highlights that in times of geopolitical uncertainty, gold is expected to trend higher in the immediate term. The study talks about the performance of gold over the last two decades to understand the long-term trend for the yellow metal. It shows that on an average, gold has returned ~11% CAGR in the last 20 years.

Naveen KR, smallcase manager & Senior Director – Investment Products, Windmill Capital, said, “It would be ideal to advise investors to invest in portfolios including both gold and equity. The performance of gold will offset the poor performance of equities during unfavorable macro events or persistently high inflation.”

As per the study, gold is an efficient asset class that provides safety. Historically, whenever there is turmoil in the market, investors’ natural tendency is to flee to safety. Gold as an asset class tends to do well during crises. For example, while Nifty returns have been negative during the Covid crisis or the Russia-Ukraine war, gold returns have been positive with <20% returns. Hence gold is an effective hedge against equities. The table compares performance of gold against Nifty 50 performance during times of crises.

Also Read: 5 things to check before buying gold coins this Dhanteras

Secondly, gold also acts as an efficient hedge against inflation outperforming Nifty