Gold Technical Levels : The Senate race will also be closely watched for gold traders, given that a blue wave scenario would likely push real yields further into negative territory and thus underpin the precious metal.
With yesterday’s breakout following the trendline breach, initial topside is seen at 1965 (COVID vaccine peak) with the September double-top just ahead at 1970-75. On the downside, support resides at 1930-35, while failure to hold puts 1900-05 in focus.
Gold has maintained its allure through time and historically proved to be a compelling asset class. Gold investments reduce portfolio volatility, provide a hedge against inflation, act as a safe haven instrument, and can potentially generate good returns. Many Indian investors buy gold, especially in jewellery form, under the impression that these purchases constitute an investment in gold.
Unfortunately, that is not the case. Gold jewellery purchased has an emotional value attached to it which makes it challenging to sell the asset in times of need. Further, selling your gold jewellery in times of need is not only emotionally taxing but can also yield low returns as you might have to sell it at a discounted price. So, how can you reap the benefits of investing in gold? The simple answer to that is Gold ETFs. Chintan Haria, Head- Product Development & Strategy, ICICI Prudential AMC shares knowledge to help investors understand Gold ETFs better:
What are Gold ETFs?
Gold Exchange Traded Fund (ETF) is a commodity ETF that invests in gold and tracks the price of pure gold. Instead of buying gold jewellery, gold coins or bars, you can invest in gold ETF and benefit from the rise in gold prices. Further, by investing in gold ETF you can overcome the other challenges associated with physical gold such as theft and locker charges. You can steadily increase your exposure to gold by investing regularly in gold ETFs, as one unit of gold ETF is approximately Rs. 51 at today’s prices. You can invest in gold ETFs easily through online medium as units of gold ETFs are traded on the exchanges like a stock and can easily be bought and sold. While redeeming, the value of your investment will depend on the existing gold price and the fund house will credit the amount to your bank account.
Benefits of investing in Gold ETF
Unless it is purely for consumption, investing in gold ETF is a better option than buying gold jewellery. Here are a few benefits of investing in gold ETF.
Better investment option: Many individuals believe that gold jewellery is a safe and assured investment option. However, this is not entirely true. The resale value of gold jewellery is always less than the cost. This is because a certain percentage of the cost of jewellery goes as making charges. However, if you invest in gold ETF, you will realise the prevailing price of pure gold.
Cost effective: Gold is one of the most expensive metals in the world, and you may have to invest a significant amount of money upfront to buy physical gold. Gold ETF lets you accumulate gold in small quantities for as low as Rs. 1000, over a period of time.
Liquidity: Gold ETFs are liquid investments as they are open-ended in nature. The units of gold ETFs are listed on the exchange and can be bought and sold anytime. There is no need to visit your nearest gold shop to get your gold ornaments evaluated.
Hedging option: Diversification is an essential ingredient in financial planning. Investors consider gold as a safe haven asset as it can potentially outperform other asset classes during volatile times. This is because gold has a low correlation with most other asset classes. Hence, gold investments help to diversify a portfolio and reduce the risk associated with equity and debt investments.
Inflation hedge: The liquidity measures taken by central banks since March 2020, may cause inflation to rise. Historically gold has rallied during inflationary times. Gold ETFs should help investors as a hedge against rising inflation
To conclude, gold ornaments generally tend to be very close to our heart. However, you don’t have to depend on gold jewellery as a means of investment in gold. In short, it is time to upgrade to a gold ETF!