Is It The Right Time To Start Gold Investment?

Gold Investment is considered to be an all weather investment. More than an investment, Gold is treated as an insurance for all the other investments. It is a hedge against inflation.

During an economic downturn while asset classes such as stocks, mutual funds and real estate may tumble, Gold would still sustain and outperform them. This is the reason why portfolio managers always insist on having a fair share of your investments in gold.

Today, we see the stock markets across the globe have become more volatile due to geo-political tensions with Russia- Ukraine conflict and stringent covid-lockdown in China. Fears of economic recession and increase in Fed rates has created the perfect situation for gold to skyrocket again.

Is this the right time to invest in gold? Ideally, yes. Stock markets are down, cryptos have crashed and real estate is yet to recover. Gold at its present value looks attractive. Experts believe people will shift their focus to gold if stock don’t recover soon.

Gold’s performance in the last 20 years

The annualized return from march 2000 to march 2020, Nasdaq 100 had a return of 2.5 percent, S&P 500 gave a return of 4 percent whereas gold gave a return of almost 9 percent. 

In 2020, gold delivered an annual average return of 24.6 percent. Over the last 40 years gold provided an average annual return of 9.6 percent and negative returns only at 8 instances. 

Stock Vs Gold performance during the economic crisis

During the 2008 global financial crisis, while the stock market fell as much as 60 percent, gold remained unaffected and in fact it grew by 6 percent. The same would be visible with multiple other crisis situations like the East-Asian crisis. 

This clearly indicates that gold is a safe bet when it comes to economic downturns. 

How to start gold investment? 

There are multiple options to invest in Gold like buying physical gold, Gold ETFs or Sovereign Gold Bonds (SGBs). 

• Physical Gold can be purchased in the form of coins or bars. Buying jewelry isn’t an investment.
• A gold ETF is a type of ETF that can be purchased or sold on a stock exchange like any regular stock. The option eliminates storage costs & security risks of holding physical gold but comes with an expense ratio and Capital gains tax.
• SGBs are substitutes for holding physical gold. SGBs are less risky as they are guaranteed by the government. But there is more to add, these bonds offer 2.5% interest and NIL Capital Gains tax if they are redeemed by completing the term(8years).

Options like SGBs and Gold ETFs are termed as Paper-Gold which obviates the need to buy physical gold and store them while assuring the same return.

If the World Bank & IMF are to be believed, the global economy is slowing down significantly due to covid and geo-political tensions. Global trade has shrunk. And stocks, mutual funds, cryptos, real estate will see a major correction. Smart investors looking for better investment options would definitely find gold as their best bet. So it’s time for you to become smart by starting to invest in gold.