Experts said as a practice and tradition, one should invest in gold on Dhanteras, the first day of Diwali.
Traditionally, people invest in gold on Dhanteras as it is believed to be auspicious and brings prosperity for the buyer. As a practice and tradition, it is said that one should invest in gold on first day of Diwali, experts said.
Gold has become costlier in domestic market, trading above Rs 30,000 levels per 10 gram due to high import price on weak rupee, but the global price has been declining due to rising US dollar demand as US economy is showing signs of growth.
In dollar terms, gold has lost nearly 15 percent since January 2018. While domestically, gold futures on MCX have gained 15 percent since January 2018. As most of the gold is imported, weakening rupee pushes up the price of gold in rupee terms.
Despite this, one should make small amount of investment in gold on Dhanteras Day, experts said, overall, everyone should have gold in their portfolio as it is a safe haven bet whenever there is equity turmoil globally or domestically.
"As a tradition, one should continue with the practice and make a small investment at the current level, however, investors should evaluate overall situation and wait for the right levels to make their allocation into gold," Pritam Patnaik, Head Commodity, Reliance Commodities told Moneycontrol.
An investor needs to construct his or her portfolio based on prudent risk and return expectations.
"Gold along with real estate, fixed income and equity are key asset classes to invest. Given the uncertainties surrounding trade war and higher volatility in currencies, gold is an excellent investment from a hedging perspective as well," said Vineeta Sharma, Head of Research at Narnolia Financial Advisors which has a positive view on gold prices going forward.
How much one should allocate directly to gold or related products (Sovereign Gold Bonds, Gold ETFs etc) and other asset classes depends on situation and varies from person to person, but overall, experts said it should be around 5-10 percent of your portfolio, which can balance the portfolio well.
"Portfolio allocation of 5 percent towards the yellow metal can provide portfolio diversification and potentially strong returns in the next few years," Jigar Trivedi, Fundamental Research Analyst-Commodities at Anand Rathi Commodities told Moneycontrol.
Navneet Damani, AVP-Commodity Research, Motilal Oswal Financial Services said an average Indian portfolio consists of about 5-6 percent of gold, and in the underperformance stage it tends to go even lower.
Since he expects that the tide is about to turn for gold and stellar returns could be delivered, he advises to go aggressive on gold and increase the asset allocation to around 10 percent of one's portfolio.
In the short term, gold prices may be steady, but in the long run it is going to provide strong returns, experts said.
"In the overseas market, the investment demand has picked up marginally in October, that too for the first time since April 2018. The SPDR Gold ETF has experienced flight of safe haven inflows due to rising geo-political worries between US & Saudi Arabia. But rising dollar has mitigated the impact of rising investment demand. So over all the yellow metal may not appreciate in short term," Jigar Trivedi said.
Navneet Damani said over the next couple of years, he sees a lot of ground to be covered by gold even as it looks to fill the gap of mean reversion, and to top it up, if macro-economic situation weakens, which means higher inflation and depreciating emerging market currencies along with weakening growth could be perfect backdrop for a gold rally.
Though the speed this time may be slow compared to what transpired in 2008 and 2012, but a 30 percent rally over the next two years could be right on the cards, according to him.
