Should you be investing in gold right now?

Sep 18

07:14

2008

Aadi Sharma

The marked downward trend of the stock markets after reaching its peak, due to various reasons, has definitely set the investors thinking.

Should you be investing in gold right now

The marked downward trend of the stock markets after reaching its peak, due to various reasons, has definitely set the investors thinking. Under the given circumstances, the investor is looking for investments that would not eat into his savings. In times of such crisis the only safe place to park your money would be 'gold'. Gold is a real, tangible asset whose value does not go down like that of paper money. On the contrary, its value increases in tandem with the inflationary trend. In fact, the gold reserves of a country are an indicator of the country's economic strength. According to finance gurus gold has and will always remain a safe investment option not only as a hedging instrument but as a highly appreciating asset as well. So is this the right time to invest in gold?

The recession in the US, the strengthening of the rupee and the increase in oil prices set the stage for the gold rates to increase in the coming months. Coupled with this is the Indians ongoing love affair with gold which only helps in pushing up the ever increasing demand for gold. Incidentally, India is the largest consumer of gold. The return of 18% that gold has yielded in the first two months of 2008 only goes to prove that this is the right and opportune time to invest in gold.

Under the current market conditions gold provides good capital appreciation. Although the sensex has taken a deep dip, the gold Exchange Traded Funds have done very well, yielding a return of more than 25% in the last three months. Investing in ETF's is a safe long term bet as you have the added advantage of no wealth tax being attracted and no concerns of the purity of gold as well.

This is also a good time to invest in mutual funds that invest in shares of mining companies of precious metals. Due to the growth and profit factor of companies the shares will yield you much higher returns in a short period itself.

Major players in the world gold market like investment banks, bullion traders and gold funds only buy gold of a guaranteed quality. For this reason it is advisable to invest in gold coins and biscuits rather than jewellery.

So, this seems to be the opportune time to invest in the glittering metal. However the entry time is important. Some analysts feel that there may be a correction by 7 to 8 %, and ultimately the value of pure gold may stabilize at a higher rate in next few months. That may be the right time to start investing in the yellow metal.

Addi Sharma is a well known author and has been writing content for iTrust. iTrust is the leading personal finance portal in India providing excellent financial planning, real estate services, and best home loan in India.

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