Why does gold have an important place in everyone's portfolio, irrespective of age and gender? The decision to buy gold this Akshaya Tritiya depends on several factors. Check here before you invest
Gold has long been revered in India and around the world, not just for its aesthetic appeal but also for its historical significance, status value, and cultural importance. It has held a mesmerizing charm for centuries, captivating individuals worldwide with its intrinsic allure. Gold's significance dates back to ancient civilizations, where it served as a form of currency due to its rarity and durability, a symbol of power and status as also a store of value that could be easily exchanged or sold in times of need. In many cultures, including India, possessing gold jewelry, coins, or bars is a sign of wealth and prestige. Even today, many consider gold as a safe-haven asset, a hedge against inflation, and a symbol of financial security; the daily, monthly and longer-term gyrations of its price are conveniently forgotten in such financial analysis.In India, this fascination with gold transcends mere financial investment; it is deeply embedded in our culture, tradition, and social fabric, making it an indispensable asset for individuals of all ages and genders. It holds a special place in religious ceremonies, weddings, and festivals. Its rarity and beauty have made it a prized possession, often passed down through generations, symbolizing family heritage and financial security.
For example, in South India, it's common to see women adorned with gold jewelry during festivals and weddings. In states like Kerala, gold is an integral part of religious ceremonies and is considered auspicious for newborns. Similarly, in North India, gold plays a significant role in festivals like Diwali and Dhanteras.
As Akshaya Tritiya approaches, a time considered auspicious for buying gold for prosperity and good fortune, the gold-buying frenzy is about to be unleashed notwithstanding the current stratospheric rates Gold has reached currently.
Buying gold this Akshaya Tritiya?
The decision to buy gold this Akshaya Tritiya depends on several factors. The historical reasons notwithstanding, investors should consider their financial goals, risk tolerance, overall asset allocation and the current market conditions before making a purchase. Gold prices can be deeply influenced by factors like geopolitical tensions, economic indicators, and currency movements.What are the preferred forms of gold investment?
For investors in India, there are several ways to invest in gold. One can buy physical gold in the form of jewelry, coins, or bars but it often comes with big making-charges and may not be the most cost-effective investment option. However, if you’re buying gold for the sake of its allure, for religious purposes or just to feel rich, then probably physical gold only will satiate that desire. For investment purposes, there are gold ETFs (Exchange Traded Funds), gold mutual funds, and sovereign gold bonds, which provide a convenient and cost-effective way to invest in gold without the hassles of storage and security.Coming to gold as an investment, after a solid performance last year, the question on every investor's mind is: can it break new records, or is there a big correction lurking around the corner?
Why gold may keep shining:
Interest rate pivot: When central banks, like the Federal Reserve of the US and RBI, lower interest rates, other investments might lose their appeal because they don't earn as much. Gold suddenly seems like a safer, better choice.Dollar depreciation: If the US dollar loses value, it makes gold cheaper for investors outside the USA. That can boost demand, pushing prices up.
Geopolitical tensions: Uncertainty in the global landscape, like ongoing conflicts or political instability, drives investors towards safe-haven assets like gold.
Inflation hedge: Gold tends to keep its value when prices go up; so, it's seen as a protection against inflation. As costs increase, so does the appeal of gold.
But there are reasons to be careful:
Inflation trends: If inflation cools down, gold might not be as attractive as an investment, since it's seen as a safeguard against rising prices.
Unexpected policy shifts: Any change in the Fed's or RBI’s monetary policy stance or positive economic data that strengthens the dollar, could derail a gold rally.
Market volatility: Gold prices can be like a rollercoaster—rising one minute, falling the next. This kind of unpredictability can be a risk for investors who don't like surprises.
What does this finally mean for you as an investor?
Will gold reach new record highs? It’s hard to say, but with everything happening in the world, it's clear that gold's allure isn't going away anytime soon.
If you’re thinking about adding gold to your investment portfolio, remember that it's one piece of a much bigger puzzle. Diversification is the key. Gold can be a valuable asset, providing a safety net in uncertain times, but it's not immune to market swings. As a general rule, it's wise to limit gold investments to about 5-10% of your total portfolio.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
This story originally appeared on: India Times - Author:Faqs of Insurances
