With Dhanteras falling on November 6, investors looking to buy gold are entering the festive season after a sharp correction in precious metal prices. The recent fall may prompt buyers to consider fresh purchases, but market volatility makes it important to look beyond short-term price movements.
Gold prices are influenced by several factors, including US bond yields, the dollar, inflation and geopolitical developments. Domestic prices are also affected by the rupee-dollar exchange rate and import duties.
Samit Guha, managing director and CEO of MMTC-PAMP, said investors should avoid trying to time the market and instead consider systematic investments when building exposure to gold.
“Any asset class which is very volatile, but yet holds value in terms of being a part of your portfolio, the best way to do it is through an SIP,” Guha said.
He said investors could consider daily, weekly or monthly systematic investment plans (SIPs) rather than investing based on short-term price movements.
How much gold should you hold in your portfolio?
Guha said investors could consider gold and silver as part of their overall investment portfolio. He cited the 5-10% allocation range suggested by some fund managers and wealth managers for alternative assets such as precious metals.
The allocation, however, should depend on an individual’s financial goals, risk appetite and existing investments.
Physical gold, ETFs or digital gold?
Investors can access gold through jewellery, coins and bars, gold exchange-traded funds (ETFs) and digital gold. The choice depends on the purpose of the purchase.
For investment purposes, Guha said coins and bars or digital investment options could be considered, while jewellery purchases also involve making charges that can affect resale value.
Check purity before buying physical gold
Purity is an important consideration when purchasing physical gold. Guha pointed out that 24-carat gold is available in different purity grades, including 995, 999 and 999.9.
Buyers should check the exact purity rather than relying only on the 24-carat label. For jewellery, they should also check hallmarking, weight and making charges.
Don’t focus only on making charges
The final price of gold can include several components, including the underlying gold rate, applicable taxes, dealer premiums and, in the case of jewellery, making charges.
Guha said buyers should compare the final price, purity and quantity of gold rather than choosing a product solely because it has lower making charges.
With gold prices having corrected, Dhanteras may bring renewed interest from buyers. However, investors should assess their allocation and investment horizon rather than making decisions solely on the basis of recent price movements.
NOTE TO READERS
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers should consult certified experts before making any investment decisions.