- Date : 21/02/2023
- Read: 3 mins
Expert recommendation on gold investment in rising inflation
The rising inflation has become a major concern for households and investors alike. While the RBI is taking measures to curb the rising retail inflation, the results are not yet apparent.
In times of rising inflation, equity might lose its real value, and investors look for inflation-beating avenues. Gold comes to the forefront and is often called a safe haven. While households invest in gold for its ornamental value, many are also attracted by its investment value. They invest in gold to create an appreciating asset. But is gold investment sound in rising inflation?
Here’s what experts say –
- Hedge against inflation
Gold is a popular investment avenue that acts as a hedge against inflation. The purchasing power of gold is preserved even in rising inflation. As such, it makes for a good investment when inflation is rising.
- Macroeconomic effect on gold prices
Uncertainty in the economic markets, the global recession, the Ukraine-Russia war, etc., have positively impacted gold price movements. Amidst uncertain times, people consider gold a safe haven and turn to it for creating assets. This pushes gold demand, which, in turn, increases its price.
- Means of last resort
Gold investments are considered the last resort for liquidation when investors suffer an emergency. So, it stays in the portfolio and creates a safe asset.
- Stability
Gold prices do not fluctuate considerably when there are market upheavals. As such, gold delivers stable returns on investments.
- Portfolio diversification
Gold is a different asset class compared to equity and debt. It provides portfolio diversification and allows you to benefit from the upside of increasing gold price movements with stable returns.
- Correlation with interest rate hikes
Interest rates and gold are inversely correlated. So, when banks change the interest rates, gold prices are affected positively, yielding returns on your investment.
- Attractive returns
Regarding returns, gold has proved to be a lucrative avenue. Over the last 10 years, the asset has yielded absolute returns exceeding 60%. Gold prices are consistently increasing, appreciating the asset over time.
- Multiple investment avenues
Lastly, the different types of investment avenues also make gold investments popular. While many investors opt for the traditional route of investing in physical gold, new-age investors prefer digital gold and gold mutual funds where the required investment amount is lower. Moreover, there are Sovereign Gold Bonds (SGBs) that offer guaranteed returns on investment and capital appreciation through rising gold prices.
Related - Know which one is better - Physical gold or gold ETFs
What should you do?
As an investor, gold can be a good addition to your portfolio. It can hedge against inflationary pressure, be a safe haven and deliver stable returns. Moreover, it aids in portfolio diversification and proves worthwhile when equities are bearish.
So, gold investments are fruitful, and you can invest a part of your portfolio in gold in different forms.
Related - Know what to do amidst rising gold prices
Know whether the gold investment can act as a hedge against inflation in 2023 in this video
The rising inflation has become a major concern for households and investors alike. While the RBI is taking measures to curb the rising retail inflation, the results are not yet apparent.
In times of rising inflation, equity might lose its real value, and investors look for inflation-beating avenues. Gold comes to the forefront and is often called a safe haven. While households invest in gold for its ornamental value, many are also attracted by its investment value. They invest in gold to create an appreciating asset. But is gold investment sound in rising inflation?
Here’s what experts say –
- Hedge against inflation
Gold is a popular investment avenue that acts as a hedge against inflation. The purchasing power of gold is preserved even in rising inflation. As such, it makes for a good investment when inflation is rising.
- Macroeconomic effect on gold prices
Uncertainty in the economic markets, the global recession, the Ukraine-Russia war, etc., have positively impacted gold price movements. Amidst uncertain times, people consider gold a safe haven and turn to it for creating assets. This pushes gold demand, which, in turn, increases its price.
- Means of last resort
Gold investments are considered the last resort for liquidation when investors suffer an emergency. So, it stays in the portfolio and creates a safe asset.
- Stability
Gold prices do not fluctuate considerably when there are market upheavals. As such, gold delivers stable returns on investments.
- Portfolio diversification
Gold is a different asset class compared to equity and debt. It provides portfolio diversification and allows you to benefit from the upside of increasing gold price movements with stable returns.
- Correlation with interest rate hikes
Interest rates and gold are inversely correlated. So, when banks change the interest rates, gold prices are affected positively, yielding returns on your investment.
- Attractive returns
Regarding returns, gold has proved to be a lucrative avenue. Over the last 10 years, the asset has yielded absolute returns exceeding 60%. Gold prices are consistently increasing, appreciating the asset over time.
- Multiple investment avenues
Lastly, the different types of investment avenues also make gold investments popular. While many investors opt for the traditional route of investing in physical gold, new-age investors prefer digital gold and gold mutual funds where the required investment amount is lower. Moreover, there are Sovereign Gold Bonds (SGBs) that offer guaranteed returns on investment and capital appreciation through rising gold prices.
Related - Know which one is better - Physical gold or gold ETFs
What should you do?
As an investor, gold can be a good addition to your portfolio. It can hedge against inflationary pressure, be a safe haven and deliver stable returns. Moreover, it aids in portfolio diversification and proves worthwhile when equities are bearish.
So, gold investments are fruitful, and you can invest a part of your portfolio in gold in different forms.
Related - Know what to do amidst rising gold prices
