Gold up by nearly Rs 2,000 per 10 grams in November. Is it the right time to invest in gold ETFs, mutual funds?

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Gold up by Rs 2,000 in November. Is it the right time to invest in gold ETFs, mutual funds? 

New Delhi: Gold prices in India have gained by nearly Rs 2,000 per 10 grams or by over 4% since the beginning of November as inflation concerns rise globally. Worth mentioning here is that Gold ETFs garnered investments worth Rs 304 crore in October this year. In the last one week, gold funds occupied the top position in terms of returns generated by different mutual fund schemes. 

Experts say the sudden increase in gold prices across the globe can be attributed to rising inflation fears. Consumer price inflation data in the US and worldwide indicate rising inflationary pressure. This is against the view of global central banks, which earlier have said that the rising inflation is “transitory” in nature.

Analysts say rising inflation globally bodes well for the yellow metal as investors will buy more gold to hedge their portfolios.

“The Federal Reserve maintains that interest rate hikes are only expected by the end of 2022, which combined with rising inflation translates into lower real yields and has revitalized the trade in gold. Investors are getting nervous about inflation getting ingrained in the post-pandemic world and the Fed underestimating multi-decade high inflation and making a policy mistake. In addition, rising inflation is expected to impact corporate profits, hurting the global economic recovery as well as the stock market rally,” says Chirag Mehta, Senior Fund Manager, Alternative investment, Quantum Mutual Fund.

Worth mentioning here is that in the first 10 months of this year, folio numbers in gold ETFs have surged by almost 200% from 8.87 lakh in December 2020 to 26.6 lakhs in October 2021, indicating that more and more Indian investors are now including the yellow metal in their investment portfolio.

“This calendar year so far, Gold ETF category has received a net inflow of Rs 3,818.1 crores; thereby witnessing just one month of net outflows, which was in July 2021 of around Rs 61.49 crores. Gold, with its superlative performance over the last few years, has attracted significant investor interest. The consistent surge in their folio numbers is a testimony of the same,” ET Online quoted Himanshu Srivastava, Associate Director – Manager Research, Morningstar India as saying in a report.

Chirag Mehta says investors who do not have gold in their investment portfolio should include the yellow metal in their portfolio now as part of a diversification strategy. “To benefit from gold’s upcoming inflation play, and to diversify your portfolio against potential stock market corrections, new investors can use price dips to build their allocation to gold up to 10-15% of the portfolio in a disciplined way,” Mehta said.

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