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In an interesting trend, gold has performed at par with the large cap equity fund category. The data suggests that gold has delivered CAGR of 16.17% in 5 years compared to 15.50% of the Nifty 100 Index.
Varanasi MFD Shailly Seth of 12months.in attributed this to the geo political uncertainty. She said, “Gold is a timeless asset. For the last few years, there has been uncertainty globally due to major wars. Also, many central banks are looking to increase their gold reserves due to which the demand of gold and gold prices are rising. In addition, a weak USD has contributed to increase in the demand of gold. Since gold is traded in dollar terms, many investors buy more gold whenever USD gets weak.”
Agra MFD Shifali Satsangee of Funds Vedaa also echoed a similar sentiment. She said, “During the times of war and economic turmoil, gold outperforms large cap. The political uncertainty makes people migrate towards buying gold.”
Shifali believes that the prices of gold will go up further. She said, “There has also been rising expectation of an interest rate cut in the US which has increased the demand for gold.”
Chennai MFD Chokkalingam Palaniappan of Prakala Wealth does not think this trend is going to continue for long. He said, “Gold is a valuable asset and I would recommend allocating up to 20% of your portfolio to it. When it comes to large caps, there is no need to worry. We are very bullish on the Indian market. There will be some downturns but we still expect good returns for a long time.”
Mumbai MFD Gajendra Kothari of Etica Wealth points out that many Chinese investors have bought gold. He said, “Both China’s government and Chinese investors are buying gold due to the underperformance of Chinese stock markets.”
Talking about the future prospects of gold, Gajendra said, “Gold is very inconsistent as an asset. It performs well in bursts and can become stagnant in the subsequent year. Right now, both equity and gold are performing well but I would still prefer equity as it has more visibility in terms of giving returns.”
