Is it a gold rush? Gold prices are rising. What should investors do -buy, sell or hold?

Tips for investors in rising gold prices

Gold Price Rise

Gold has been a sought-after metal for many. Some invest in gold for its ornamental value, while others buy gold to create their asset portfolio. For investors, gold serves as a haven and a hedging tool. Recently, the price of gold broke the $1900 per ounce mark in international markets. Even in India, gold futures traded at Rs.56,245 per 10 grams on the MCX. With rising prices, gold has suddenly become a hot favourite among investors. Should you ride the gold wave?

Let’s analyse.

Growth in gold prices in recent times

Since November 2022, gold prices have been rising internationally. Moreover, the falling rupee value over the last year has boosted gold prices recently. Here’s how gold and its related investments have been performing over the past few months –

  • Over the last three months that ended on 12th January 2023, gold Exchange-Traded Funds (ETFs) gave 10.98% returns. On the other hand, silver ETFs yielded 19.36% returns for investors.
  • In march 2022, the price per ounce of gold hit $2070 in international markets after the Russia-Ukraine war commenced. However, with rate hikes in the US, gold prices lowered.
  • Experts believe gold prices to cross the Rs.60,000 mark in 2023.

Related Article - See how gold performed in 2022

What should investors do?

Gold, as an investment, has its own set of risks. While the international prices jumped in March 2022, other factors like rate hikes and a strong Dollar pushed the prices down the $2000 mark. Thus, investors who invested at inflated prices are still to see returns from their investment.

While gold prices might jump, if they fall, it takes a long time for gold to recover and deliver positive returns to investors. Gold yields non-linear returns; if your investment is not timed right, you might lose out.

Moreover, past returns do not promise future performance. Gold investments also don’t promise any interest on your investment. So, you need to be careful.

That being said, you can gain from gold investments because of the following reasons –

  • There’s high volatility in the equity market, and gold is a safe haven.
  • Geo-political tensions are high.
  • There’s a fear of recession hitting major economies

You can capitalise on gold prices moving north, but there are investment risks too. If you invest with a long-term perspective, however, you can generate returns. Gold ETFs, gold mutual funds and Sovereign Gold Bonds are good choices. For asset creation, you can also pick physical gold.

Whatever you do, ensure that your investment aligns with your financial goals, time horizon and risk profile. Build up a diversified portfolio; gold can be one part of the diversified portfolio. Do not depend on gold solely for corpus creation. Build up a portfolio with equity, debt and other assets, including gold, so that you can benefit from the upside but limit your losses should gold prices fall in future.

Related Article - Check out whether physical gold or gold ETFs are better


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