Your Money: Make a smart investment in gold ETFs this Diwali

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We hope you’re within the latter category. That’s because Diwali-Dhanteras is round the corner, and rather like each year, it’s an honest idea to honor the tradition and invest in gold.

Domestic gold prices have corrected by 9% over the last year. It could either lead you to exit the asset class or nudge you to extend your allocation at lower prices.

We hope you’re within the latter category. That’s because Diwali-Dhanteras is round the corner, and rather like per annum, it’s an honest idea to honor the tradition and invest in gold.

Risk aversion
While gold benefitted from the danger aversion through the Covid-19 crisis, the sentiment has now changed due to the roll-out of successful vaccines and subsequent opening from economies.

Sure, that might negatively impact prices. But don’t discount this multifaceted asset class yet. Consumer incomes and sentiment have improved.

A recent report by the globe Gold Council reveals that for every 1% increase in gross value per capita, domestic gold demand in India has historically risen by 0.9%. An honest monsoon and therefore the upcoming festive season in India should further aid the uptick in consumer demand.

Global macros
While the Covid-era ultra-accommodative monetary and financial stimulus measures have helped bring back consumer demand, they need to throw up a brand new challenge.

Global supply chains, disrupted by the pandemic, haven’t been able to match up to the rebound in demand, leading to prices of products and services rising.

At the identical time, major developed countries just like the US and therefore the UK is seeing fewer people returning to their jobs post the pandemic, which is pushing wages up.

All of this is often translating to higher global inflation. As per the globe Gold Council, for every 1% increase in inflation from 1990 to 2020, Indian gold demand increased by 2.6%, proving that Indians have used gold to tackle higher inflation.

While returns are a significant motivation to take a position in gold, one should remember that gold’s utility extends beyond that.

It’s also a source of liquidity, a portfolio diversified, and an asset that will help combat the consequences of upper inflation on a portfolio. Buying gold can thus be a decent move for your overall financial well-being.

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