Dhanteras: Dhanteras: gold at its highest level in six years, but be careful before investing in it

NEW DELHI: If you think rising gold prices have brought bulls back to the yellow metal counter, it's time to rethink.

The purchase of gold on Dhanteras – considered the most auspicious day to buy jewelry – may present a sentimental potential, but badysts believe that this purchase for investment purposes can be a naive decision.

"Diwali is getting closer and the general ideology of the mbades is to buy gold because the price of gold tends to rise higher than usual. But to recommend someone to buy gold during this period would be a naïve advice, "said Brijesh Parnami. , Executive Director and CEO of Essel Wealth Services.

"People tend to buy gold for religious or sentimental reasons because it is considered auspicious. But history shows that if the same amount had been invested in mutual funds or another mode of investment, it would have generated higher returns. The price of gold is unstable, but it should still be part of any growing portfolio. While most markets are in free fall, the presence of gold in a portfolio is a hedge against market uncertainties, "added Parnami.

Gold prices have jumped nearly 7% since the last Dhanteras (October 17). But over the previous five years – from Dhanteras to Dhanteras, with the exception of 2016 where the yield was 16.46% – the yellow metal produced negative returns of between 3 and 10%.

"Despite many world events, the price of gold abroad has not experienced any respite," said Prathamesh Mallya, chief badyst – Raw Materials and Currency at Angel Broking.

He noted that yellow metal prices in the world were down 6% since the beginning of the year and that it was simply because of the sharp depreciation of the rupee that its prices in India had increased by 8% over the same period.

Mallya saw gold prices trade broadly in the range of $ 1,120 per ounce down and $ 1,300 up. "I'm not so optimistic about this counter," he said.

Dhirendra Kumar, CEO of Value Research, is on the same length of the wave, saying that gold as a means of investment should be ruled out.

"You should regard it as a consumption, as a pleasure, because gold in the form of jewelry has the highest transaction cost or the largest overhead costs (manufacturing costs). Since the creation of sovereign bonds on gold, gold ETFs have proven to be the best form of property, trying to profit from the appreciation of gold. My opinion is that gold is not a worthwhile investment. It's a valuable repository. It has the ability to defeat inflation, but its economic logic is not strong enough, "Kumar told ETNow.

Kumar said that he would consider gold bonds as a very unusual investment. But it turns out that this is the most effective way to own gold in a financial framework, because it gives you a 4% yield, more than the appreciation of gold, has -he explains.

"ETF Gold Funds and Gold Funds have an expense ratio and a long-term outlook for equities, fixed-income securities or real estate holdings. , gold has no chance, "continued Kumar.

On Monday, the yellow metal quoted at a six-year high of Rs 31,565 per 10 grams, suggest MCX point data.

According to Parnami, an investor in the 25 to 35 age group would normally retain 70% of equity, 15% of debt, 10% of gold and 5% of cash. The older ones should have more funds in debt instruments and their gold should be between 10 and 15%.

Jaideep Hansraj, CEO of Wot Management, Kotak Mahindra Bank, whose company specializes in HNIs, said that gold was an ideal hedge for exchange rate fluctuations, with gold ultimately valued in dollars per ounce.

"In risk-off mode, there might be an allowance, which I see seeing people earn gold. But I do not think it will be a substantially large number from the point of view of high net worth, "he said.