Achi news desk-
Consider investing in gold, focusing on gold ETFs or sovereign gold bonds (SGBs), rather than traditional forms such as jewelry or coins
Gold prices fall after all-time high rates.
New Delhi: Everyone wants to buy gold, but hearing its price makes one lose courage before buying. At the present time, gold prices have fallen significantly from the all-time high, and that too in just one month. This may be the right time to buy gold. Let’s find out how much gold prices have fallen in the last month and why gold is a good investment option.
On the Multi Commodity Exchange (MCX), gold expiring in August touched an all-time high of ₹ 74,777 per 10 grams on May 20, 2024. On Friday, June 14, gold touched an intraday high of ₹ 71,947 per 10 grams. In about one month from May 20 to June 15, 2024, gold prices fell by more than ₹ 2,800 per 10 grams.
One of the reasons for the drop in gold prices is the results of the Federal Reserve meeting. The Federal Reserve kept its interest rate in the range of 5.25% to 5.50% for the sixth time in a row. Initially, the Fed announced three rate cuts in 2024. However, in its latest statement, it changed that to just one rate cut. Due to this change, the yield rate of the dollar and the treasury increased, which resulted in a decrease in gold prices.
Another reason for the drop in gold prices is the cessation of gold purchases by China in May. The People’s Bank of China has stopped buying gold, which has been going on for 18 months. According to the World Gold Council report, China increased its gold reserves by 27 tons during January-March 2024. India, China and Turkey together purchased 76 tons of gold in three months.
Why is investing in gold a good option?
1. There are many advantages to investing in gold:
First, gold is considered a safe haven. During geopolitical turmoil, gold usually provides good returns. For example, during the Ukraine-Russia war, there was a significant increase in gold prices. Global tensions, storms or economic crises tend to increase the demand for gold, thus increasing its price.
2. Different investment options in gold:
Physical gold such as jewellery, coins or bars are not considered ideal due to making charges, locker charges, risk of loss or theft and purity issues. Besides physical gold, there are other gold investment options, such as gold ETFs, sovereign bonds (SGB) and digital gold. Sovereign Gold Bonds (SGB) offer an additional annual interest of 2.5% above the market value of gold.
3. Portfolio diversification:
Diversifying your portfolio by including different asset classes such as equity, debt, property and gold reduces investment risk. When one asset underperforms, another may perform well. For example, during a decline in the stock market, gold prices are usually seen to rise. According to personal finance experts, gold investment should make up 10% of your portfolio.
4. Liquidity:
Another advantage of investing in gold is high liquidity. You can easily sell gold online or offline when needed. Selling assets like property when money is urgently needed is challenging, while gold can be sold easily. Gold and SGB ETFs are traded on exchanges, providing the freedom to sell them whenever needed.
In conclusion, consider investing in gold, but not in the form of jewelry or coins. Instead, you can invest in gold ETFs or sovereign bonds (SGB). The maturity of Sovereign Gold bonds is 8 years, during which you can earn profits from gold without paying capital gains tax.
Posted: June 15, 2024, 2:14 PM IST
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