Gold Investment: There has been a tremendous rise in gold prices in recent months. In the last 12 months, it has jumped about 47 percent. But the latest report of Value Research gives an important warning. Gold performance is not always like this. Historical figures suggest that this metal can also give very short or zero returns for a long time. This is the reason why experts are advising to see it as ‘Risk Management Tool’, not ‘Growth Asset’.
Profit not received for seven years
The Value Research report states that gold prices rose to ₹ 75 to ₹ 163 per gram in just six months between October 1979 and March 1980. But after this, gold could not touch a new high level for seven years. Similarly, between 1995 and 2000, it gained an average of just 0.7% annually. And from January 2012 to November 2018, prices remained in the same range for almost seven years.
Gold is not like a stock market
According to the expert, gold is an asset that does not give dividend or interest nor is there an model of income creation. Its price is mainly fixed from macro factors such as inflation, currency movement and geopolitical risk. This is the reason that whenever uncertainty in the world increases, both gold demand and price increase, but thereafter there is long stagnation.
Only 5-10% invested in gold
Value Research suggests that investors should apply only 5 to 10 percent of their portfolio in gold, that too from the security perspective. Stock market, mutual funds or other products can be a better option for growth. Gold ETF or Fund of Funds have been considered more economical and convenient than physical gold.
Do not trust the recent speed too much
Although gold has been accelerating in the last one year, the report clearly stated that future returns cannot be considered guarantee. Investors need to proceed with a balanced, diversified and practical strategy.
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