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Should you be investing in gold in 2021?

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Should you be investing in gold in 2021?


Gold performed well in 2020 with gains of nearly 28 percent in rupee terms (YTD).

Should you be investing in gold in 2021?
Gold performed well in 2020 with gains of nearly 28 percent in rupee terms (YTD). This was the second year in a row when gold posted such a stellar rise.
This made many individuals realise that a sensible portion of their investment has to be in this yellow metal.
Now, as we have entered 2021, it is important to see if the yellow metal will continue to remain in focus for investors.
According to Prof Arvind Sahay, Chairperson, IGPC, gold prices still have the scope to increase by 20 to 25 percent in 2021-22.
“As a new normal is yet to be established in the financial markets, there could be some systemic risks looming, which may provide support for higher prices for gold,” he believes.
Ishu Datwani, Founder of ANMOL, seconds Sahay’s views and says that gold will continue seeing a steady and gradual appreciation of prices in 2021.
Snehal Choksey, Director of Shobha Shringar Jewellers, meanwhile, expects gold to reach 2,300 per Oz by the end of 2021.
However, Pranjal Kamra, CEO – Finology, says the same kinds of returns cannot be expected in the coming years.
“The yellow metal delivered stellar returns in the calendar year 2020 but these kinds of returns cannot be expected in the coming years since the economy is expected to revive, given the liquidity infusion by different central banks and the availability of vaccine in the world,” Kamra warns.
Now, with that difference in views, is it a wise idea to invest in gold in 2021 too?
Ravindr Rao, VP- Head Commodity Research at Kotak Securities, believes that it's always good to invest in gold.
“With the huge monetary and fiscal expansion, concerns about inflation, currency debasement and debt, defaults are increasing and this itself gives investors enough reason to remain invested in gold. The weaker outlook for the US dollar on the back of loose monetary policy stance and worsening virus situation also makes a bullish scenario for gold,” he opines.
Escalating virus situation is proving to be a challenge for the global economic recovery.
Thus, in 2021, Rao expects, the key area of focus will be how soon a large population is vaccinated to help economies reopen and normalise.
“The overall outlook for gold remains bullish for the third consecutive year and investors should remain invested from a diversification perspective,” he suggests.
Additionally, as Kamra says, gold can always be considered as a healthy investment instrument that can be used for hedging.
"Therefore, irrespective of the market conditions, one must invest 5-10 percent of their portfolio in gold without worrying much about the short-term fluctuation," he advises.
While traditionally gold was exchanged or bought in a physical form and still is, there are certain problems attached to handling physical gold such as storage or chances of theft, purity concerns, etc. Given the problems associated with physical gold, one could invest in gold ETFs, digital gold, or sovereign gold bonds instead.
The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
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