Gold investment strategy: Picking right instrument is the key, says this expert; this is what he suggests

Amid uncertainities in the stock markets, geo-political tension and fears due to rising inflation, investors are in a fix whether to invest or not and where to invest? Tanwir Alam, Founder and Chief Executive Officer (CEO) at Fincart has some valuable tips for investors.  

"Gold is one of the most preferred investments in India. Indians love investing in Gold, not only in the form of jewellery but also as investment. Gold has retained its value and purchasing power during inflationary environment hence it is considered a normal hedge against inflation," Alam said.  
 
Contrary to the popular perception of gold being a safe investment option, the yellow is as volatile as any market linked investment product, he said. When the world passes through uncertainty and turmoil gold prices tend to shoot up, Alam said adding that as things settle down gold prices falls.

Gold went up during the last sub-prime financial crisis in US to almost 1838 USD/ Oz in July 2011 after US Federal Reserve went ahead with quantitative easing, the CEO said.

"When Fed started tapering the quantitative easing, Gold fell down to 1062 USD/Oz (a fall of more than 42% from the peak). It again gained newer heights to 2038 USD/Oz. in July 2020) after Fed infused huge liquidity as a part of Covid19 pandemic relief measure. It again retraced back to USD 1827/Oz. today (more than 10% fall)," he further said.   

Investing in Gold with the intent to make short-term gains may not be a good idea, he warns investors. The investment in Gold must be done with a longer-term perspective or it is best tagged to goals such as Children’s Marriage, he suggested. 

What is the best way to by Gold?

Owning a jewellery is good if one wishes to use or consume. Buying physical Gold involves storage risk and cost, the Fincart CEO said. The best way to own Gold is in the following ways:

Digital Gold or Gold ETF – Gold available in paper form can be easily bought over the stock exchange. 

Sovereign Gold Bond – The government wishes to restrict import of Gold. Hence comes up with offer for retail audience to purchase Sovereign Gold Bonds. The Sovereign Bonds value is the closing price of the Gold in the bullion market. The investor gets additional interest rates decided by the government over and above the gold price. However, the tenure of the bond is 8 years and can be redeemed at the end of 5th year. 

To someone who is not concerned with the liquidity can buy Sovereign Gold Bonds while investors who prefer liquidity can invest via ETF or in Digital Gold.

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)