Investors around the world are shifting their investments in risky asset classes like stocks to risk-free assets like government bonds, gold, and so on, thanks to the uncertainties in the global economies caused by the Covid-19 pandemic. Traditionally, people have invested in physical gold in India for many years.
The gold price has been seeing some momentum, since the start of the year. This is because, equity markets took a beating at the start of the year, which pushed investors to invest in safe-haven assets like gold. The precious metal may not have been the favorite in the past few years, as prices had moved in a tight range. A fall in equity prices at the beginning of the year, saw some attraction to gold as an investment. Gold prices in India moved higher today. On MCX, June gold futures were up 0.6% to ₹47,331 per 10 grams, broadening the past session’s ₹435 gain. In worldwide markets, gold costs moved higher today as the risk-on rally over positive thinking about the potential vaccine for the coronavirus burnt out. Gold prices got shot in the arm after the US Federal Reserve chief warned that a full recovery of the US economy could drag through 2021.
As per reports, the Gold price might head for Rs 50,000 per 10 grams in next quarter. And it will be considered as the best performing asset in 2020. That is why, investors are asked to reshuffle their portfolio and give importance to liquid assets and gold. In the civil year ending December 2019, gold has given a return of 25% when there was no threat of the pandemic. We have noticed that a lot of World Gold Mines temporarily shut their business due to the pandemic which will also have a positive impact on gold prices – low supply and high demand. In the current year, gold has already given a return of 16% thus far and now Covid-19 is spreading in no time which can put even more pressure on equity in the coming days and this may further drive the gold prices up. In short, the costs are likely to maneuver upward in the coming days.
The most ideal approach to put resources into gold in the present circumstance is to decide on a gold-supported ETF or Gold Sovereign Obligations of the government of India. Under Gold Sovereign Bonds, investors will get a normal salary in the form of interest apart from the value appreciation in the price of bonds. Further, the capital gains on the sale of Gold Sovereign Bond held till maturity are also exempt from income tax. If these are sold before maturity, then the financial gain is taxable with Indexation benefit.