Every time there is a crisis in the world like 2008 recession or in 2000 when the internet was not that common, gold performance was at its best. Now in 2020, we are seeing the same trends about gold prices going up. In the last few months people have invested in gold in huge amounts.
Now the question that comes in our mind is- Why the price of gold is going up and should we invest in it or not?
There are several uncertainties at present in the global economy due to ongoing COVID-19 crises. People in times like these always wants to invest in less risky assets like Gold, Gold bonds, Govt. Bonds etc. Gold is currently ranging between Rs.43000-Rs.47000 per 10 grams. It has already rallied around 16% in this year. Indian people traditionally love to invest in physical gold that they can keep it in their possession. So, the question that is popping in everyone’s minds is does it make sense to invest in gold now and what are the right methods to invest in current times?
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This Is What You Need To Understand:
Gold have always done well in the times of economic stress. And according to experts, it should do well in these times as well because there is financial stress in global economy as consumptions are going down and interest rates are really low.
There is a sharp fall in the crude oil prices. Negative pricing of crude oil has also been seen, which has never happened in history. The steep fall in Dalal Street has also spared on one. Global agencies like Indian Monetary Fund (IMF) have cut Global GDP. Because of this equities will be impacted in a negative way and these global agencies will shift their investments to gold and bonds.
So, yes these factors are pointing towards an increase in gold demand in coming times. If you are a long term investor, it can give you good returns.
Will Gold Prices Go Further Up?
The short answer is they can go up. The Rupee has already fallen all-time low of 77 and economists are predicting that it will go down more due to the impact of COVID-19 situation on fiscal deficit targets. Gold has already risen over 12% in the international markets.
Gold mines globally are also shut due to Coronavirus and it can have a positive impact on gold prices because of low supply-high demand. Equities may be pressurized in coming days as COVID-19 is spreading very fast and thus gold prices can go higher.
Best Ways To Invest:
Well, the best way should be the one which is completely safe, have government security and possession should not be your responsibility. So go for Exchange Traded Fund Gold Bonds (ETF) or Gold Sovereign Bonds of Government of India. In ETF’s investors will get interest apart from appreciation in value of bonds. You get exemption in tax also if you decide to sell them after maturity. One thing to note here is that you have to do a lock in period of 7 years in this.
Further, there will not be any liquidity issues as you can also trade them in Stock Exchange as well. If you buy physical gold you have to pay TCS and other taxes. Here you don’t have to pay any of these.
