Monday, 4 May 2020

Some Important Points to Remember While Investing in Gold in 2020

Posted by MyInvestmentsPub
(published on 04-May-2020)
Gold is one of the most precious metal in the world and people have been considering it as a best hedging product when the stock markets are in trouble. Gold is one of the safest investments, recovering its value quickly through economic downturns. Its price often tracks in opposition to stock market or economic swings. When investor confidence is shattered, gold prices often climb as nervous and investors look for a safe place to put cash pulled out of the market. Gold is also a haven in times of inflation because it retains its value much better than currency-backed assets, which may climb in price, but drop in value. However, many experts are not able to conclude that the investment in Gold is good or bad. We will see the plus and minus of Gold investment in this article.

Why Gold is Good Investment Now:


Because of the Kovid-19, the entire world, especially the rich countries like US and European countries are facing severe economic turbulences. So, most of the investors tend to put on to their investments on Gold in times of recession. Gold being a safe-haven asset has no counter-party risk whatsoever and its value is retained during the recession. The following points illustrates why Gold is a good investment product now:

  1. All countries in the World are coming up with various stimulus packages to revive the economic situations in their respective countries. For this, the Governments may opt for printing more currency and there by impose the liquidity. High liquidity and low interest rates will certainly support the Gold prices to raise.
  2. The recent economic uncertainties will always be a favorable factor for Gold investments.
  3. Many experts believe Gold is a good hedging product and will do good performances while other Investment products are not doing good.
  4. The US interest rates and gold prices generally have a negative correlation.The US Government reducing the interest rates near to zero, which will make a bullish impact on Gold.  

Why Gold is Not a Good Investment:

Some experts warning the investors on investing the Gold. The following points describes why the Gold is not investment now:

1. Experts believing that the rally in Gold is already over and this rally may come to halt if some vaccine is invented for Covid-19.
2. Some Governments start selling their Gold reserves to fund their economic stimulus packages.
3. As the stock markets across the world are already at bottom level and may not go much further down levels technically  and this will impact adversely on Gold prices.
4. The peaks of Corona impact is already reached and there will be no further panic with Corona. People slowly digesting the Corona virus that they have to make the journey along with the Virus. Reducing the panic among the investors may decrease the yearn for Gold.

What We Should Do Now?


  1. Every one agrees that Gold is a best Hedging product during economic slow downs. But, should not invest your entire investible money in Gold. Always go for diversification. Your Gold portfolio should not cross 10% of your total Investment portfolio.
  2. We cannot suspect the economic turbulences in advance. So, we cannot find out the right time for Gold investments. It is always better go for Systematic Investments.
  3. Every month invest certain fixed amount in Gold or Gold ETFs for a longer period, say 10+ years to see good yieldings in Gold.

Conclusion:

Gold investments are traditionally considered as a hedge against inflation.  investors tend to hold on their money in the form of gold investments because the value of the currency tends to drop during inflationary conditions. Though inflation is coming down at present, gold is still considered a good investment, and it is advised to allocate a certain portion of your portfolio to protect against volatility. However, one should not put their entire investments into Gold and need to diversify their portfolio by including Gold investment, which is not more than 10% of total investment. Also, accumulation of Gold should be systematic and not as a lump sum.

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