Dhanteras 2017: Planning to buy gold? Here's how to invest wisely

Sarbajeet K Sen

Moneycontrol News

The festivals of Dhanteras and Diwali are likely to see hectic gold buying. However, as you head to the local jeweller to make the traditional purchase, you would be wondering whether gold is a good investment at this point? Is physical gold the best way to increase your gold holding?

Investment experts and gold traders are confident that gold will give good returns from current levels. However, they feel that one should be cautious on the amount of purchase and could also look at alternative means of purchasing gold other than buying the physical metal.

“Gold had once again crossed the $1300 an ounce and there are expectations that it will move up. There is enough upside. Over the longer period, it is good investment. There are geopolitical tensions, such as in North Korea and Syria, that would support gold,” Saurabh Gadgil, Director, India Bullion and Jewellers’ Association (IBJA), West Zone and CMD, PNG Jewellers told Moneycontrol.

Gadgil says gold buyers should spread their investments over the various festivals in the year linked to gold buying instead of a single purchase. “Investing in gold like a systematic investment plan (SIP) makes more sense. One should buy in small quantities at a time. It is better to spread it over 4-5 purchases related to gold buying festivals – Gudi Padwa, Akshaya Tritiya, Dhanteras and Diwali. It should be purchased for long term and not to speculate,” Gadgill said.

Rahul Parikh CEO, Bajaj Capital is also positive on gold. “Considering the geo-political scenario, gold is a good tactical hedge against risk in the short- to medium-term. Depending on one’s risk appetite, a 5-10% exposure (of total investment portfolio) to gold is generally considered prudent. If the actual gold exposure in one’s portfolio is less than that, one can buy gold at this time,” Parikh said.

Anil Rego, Founder and CEO, Right Horizons, agrees with Parikh. However, he suggest deferring major purchase of the yellow metal after the festival-related rise in prices dies down. “Gold prices always tend to shoot up ahead of Dhanteras in anticipation of demand. From an investment point of view, investors should wait for the Dhanteras momentum to subside before they buy gold for investment purpose. Any religious or ritual linked purchases should be done in token form only. However, we believe gold should form 5-10 percent of your portfolio allocation,” Rego said.

Investment advisors also suggest considering other forms of gold purchase, instead of physical gold. “Gold as an asset class is a hedge against inflation. It has delivered a CAGR of 11% over the last 10 years. It is advisable to allocate about 5-10% towards gold as an asset class if anyone has an investment time horizon of over 8 years. It is recommended to buy gold in the form of ETF or Sovereign Gold Bond (SGB) rather than physical gold,” S Sridharan, Head, Financial Planning, Wealth Ladder Investment Advisors, told Moneycontrol.