Stagger your investments in gold: Go for Gold ETFs or buy sovereign gold bonds in secondary market

financialexpress.com:

As gold prices have hit a new high, touching Rs 65,650 per 10 gram on Thursday, individuals should stagger investments in the metal to lower the average purchasing costs. They should look at gold exchange traded funds (ETFs) or consider buying sovereign gold bonds (SGBs) in the secondary market if they are available at a discounted price.

Gold prices have run up in response to recent US economic data, indicating that inflation continues to progress towards the 2% target and the economy is losing momentum. This is driving market expectations of a rate cut by the Fed sooner.

In the last one year, domestic gold prices have risen 15%. In the last two years and three years, prices have gone up by 25% and 45%, respectively. For a longer five-year period, the price of the metal in the domestic market has doubled. Investing in gold acts as a hedge against inflation and also as an insulation to any global political or economic uncertainties.

Investing in the metal is a time-tested portfolio diversifier and is an ideal store of value in the long term. Ghazal Jain, fund manager, Alternative Investments, Quantum AMC, says, given the current volatility in gold prices investors should look at the metal strategically and consider it as a portfolio diversifier. “Keeping a 10-15% allocation in the portfolio will help to ride out the ups and downs of the markets,” she says and adds that one can expect volatility in prices for the foreseeable future till clarity emerges on the US economic trajectory and Fed policy.

Investors should look for gold exchange traded funds (ETFs) with low tracking errors for investing. They are open-ended mutual funds backed by 24-carat physical gold schemes and the returns are benchmarked on the real returns on