In the last three months, gold has attracted huge attention from big institutions and savvy investors alike. Experts say that gold prices move in a nine-year cycle of upward and downward movement when seen in a historical context. An opinion that has gained currency among commodity analysts is that gold has entered the next nine-year cycle of upward movement.
There are a few fundamental reasons which support this line of thought. This looks more certain when one takes into account an investment horizon of two to three years. One, the tariff war between the US and China. This has made the US dollar volatile. To deal with the fluctuation in the US dollar, a few central banks (Poland, China and Russia) are buying gold as a safe haven. Consequently, in the past three months, gold prices have risen to close at Rs 38,775 for 10 grams.
Experts believe that the tariff war between the US and China may prolong which may keep gold prices firm in the near term. Two, low interest rates of central banks of developed markets make investments in gold safer than the US treasury bonds. Three, in times of economic slowdown, signs of which are visible, the attractiveness of tangible assets such as gold increases.
Given these factors, investors can add 10 to 15 per cent of their portfolio in gold ETFs. Among gold ETFs, larger the size better the option would be a thumb-rule to use when investing. Investors can consider investment in Reliance ETF Gold BeES. The scheme has higher liquidity than its peers. In the past one year, the average volume traded in the scheme is 14,943 in comparison with an average volume range of 2,500-3,000 in its peer schemes.
Returns Peer Comparison (in %)
Scheme Name
1-Year
3-Year
5-Year
Canara Robeco Gold Savings Fund
25.11
5.13
4.31
HDFC Gold Fund
24.79
4.42
4.03
ICICI Prudential Regular Gold Savings Fund
24.30
4.52
4.28
Source: Accord Fintech, Compiled by ETIG Database
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Expert Take Rupesh Bhansali, Head, Mutual Funds, GEPL Capital Among gold ETF schemes, Reliance is one of the oldest. The scheme has higher AUM than its peers. Rising uncertainty over earnings’ growth means range-bound movement in stocks. There are enough factors favouring a continued rally in gold for the next few quarters. Given these factors, investors can invest in the scheme with a period of 2-3 years.
