Gold Investment on the occasion of Akshay Tritiya

 

Akshaya Tritiya 2022 is here. Given the current volatility in gold prices, investors are contemplating if they should just do a token purchase this year or add a good chunk of gold on the day. While traditions should be upheld, the price outlook should also be kept in mind while making your gold investments. 

Central banks face difficult choices in the post-pandemic environment as they balance growth and inflation. The Russia-Ukraine war has disrupted supply chains and commodity markets, further propelled inflation, and has cast a shadow on global growth, further complicating things. How policymakers navigate this extraordinary macroeconomic and geopolitical environment will determine gold’s trajectory.

With US inflation at 4-decade highs, the Federal Reserve has put multiple rate hikes and quantitative tightening on the table. This hawkish era of US monetary policy will be challenging for the metal.

But if the Fed’s tightening coincides with a slowdown thanks to the war and persistent inflation, we are looking at a policy error and major volatility across all asset markets and potential debt crises, which will be conducive for gold.

For now, international gold prices will continue to be pulled in different directions as investors struggle to determine which has bigger implications for the metal: Sky-high inflation, potential recession, and other geopolitical and economic repercussions of the Russia-Ukraine war OR higher yields and stronger dollar thanks to monetary tightening by the Fed.

Gold because of conflicting forces is likely to be in a consolidation mode for some time. In the past, periods of consolidation in gold prices have proven to be great entry points for investors, benefitting from the upcycle in prices that followed. This makes this Akshaya Tritiya a conducive time for under-allocated investors to accumulate gold and bring up their allocation to 10-15% of their portfolio.

As one of the price-efficient, secure, liquid, regulated, and accessible gold investment avenues available in the country today, Gold ETFs can be a good choice to build your gold allocation. The Quantum Gold ETF is backed by 24 carat gold and offers investors a way to invest in gold in small denominations of 0.01 grams. Those who do not wish to open a Demat account or to time the markets, can opt for the Quantum Gold Savings Fund which invests in Quantum Gold ETF, and use the SIP option.