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Dhanteras, which marks the first day of Diwali in India, is considered auspicious to buy gold and silver. Buying gold on auspicious occasions is a part of the Indian tradition. Investment in gold can be done in the form of Physical gold, Sovereign Gold Bonds, Gold ETF, Gold Funds. Gold ETFs are basically exchange-traded funds that invest in gold.
Apart from cultural and traditional reasons, gold also has an important role to play in one’s portfolio as that of a diversifier and a hedge against inflation and volatility in other asset classes.
Chintan Haria, Head – Product Development & Strategy, ICICI Prudential AMC said that investors who are considering to purchase gold for investment purpose this Diwali can consider Gold ETFs.
“Investing in Gold ETF is as good as investing in physical gold. Since Gold ETF is held in demat, an investor need not worry about storage and safety aspects. Those without a demat can invest in the Gold Fund of Fund,” said Chintan
In terms of purity, Gold ETF purchases gold of 99.5% purity or higher. Moreover, they can be purchased or sold on the exchanges anytime during the trading hours just like equities. Investors can transact for as low as one unit of gold, he added.
Chintan Haria said that from an allocation perspective, investors can consider a 5-10% allocation to gold through Gold ETF or Gold FoF in their portfolio.
Meanwhile, domestic gold exchange traded funds (ETFs) witnessed inflows of ₹330.24 crore in September after two months of outlflows totaling ₹495 crore. In the past three months to date the yellow metal corrected 7% from $1802 an ounce (31.10 gm) to $1677.
With Dhanteras around the corner, the jewellery industry is cautiously optimistic about the demand, mainly due to the exceptionally high base last year, inflation worries and the overall rising cost of living.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint.
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