Should you continue to buy?

Ways to invest in gold

Gold Bullion. Traditionally,the physical form is the most favoured manner in which gold has been held. People have used gold to take care of contingencies such as forced migration,war,and other such events that may result in the closing down of financial and stock markets. However,for investment purpose,people should not look at jewellery. They should buy gold coins and bars instead,if they want to buy physical gold, says Veer Sardesai,a Pune-based financial planner.

Offers and discounts available. On the eve of Akshaya Tritiya,102 post offices in key cities across India are offering gold medallions in various denominations: 0.5,1,5 and 8 gram. These are 24-carat gold coins certified by Valcambi,Switzerland. The service is being provided in association with World Gold Council and Reliance Money. The post office is also giving 0.5 gram free on the purchase of 10 grams of gold. Similarly,MMTC is offering 2 per cent discount on the online purchase of gold medallions.

Besides,jewellers are running attractive discounts. It is advisable to buy gold from a post office or a bank to be sure of purity. In case of any grievance,one can write to a bank and get the matter sorted out. No such recourse is available in the case of jewellers, says Varma.

Gold ETF. Buying gold ETFs obviates storage and security concerns. ETFs also give you the freedom to purchase a single unit equivalent to one gram. You cant invest in such small units of physical gold. Says Lakshmi Iyer,head fixed income and product,Kotak AMC: Through ETFs retail investors have access to gold at wholesale prices. These prices track international bullion prices.

You may also look at investing in gold through a systematic investment plan SIP. This allows you to invest in gold consistently. But make sure that the investment doesnt increase beyond the prescribed limit about 5-7 per cent of your total portfolio, says Surya Bhatia,a Delhi-based financial planner.

Will it appreciate?

Gold has performed well over the last one year when both equity and real estate markets were in the doldrums. Nonetheless,given its high current price,experts do see some correction happening in future. A correction is likely to happen in gold. If you want to time your entry,then wait for a correction or consolidation. At present,the dollar is holding pretty firm vis-à-vis the rupee. Whenever there is an appreciation in the value of the rupee vis-à-vis the dollar,then there should be a correction in gold and that will give you a better entry point, says Iyer.

According to Ajay Mitra,managing director,World Gold Council,Gold has been moving up consistently and we continue to be bullish. Those who invested in gold are reaping the benefits.

Iyer has a more nuanced view. We expect gold prices to go upwards. However,we do not rule out an intermittent correction happening. With the kind of excesses that have been created around the world,it will invariably lead to higher gold prices in future. Investment in gold is typically advocated for the long term. It also provides a hedge to your financial portfolio.

Should you buy?

Certainly gold is a safe store of value,but does it make sense to buy it at these prices? Yes,says Bhatia. Although,there is a lot of volatility in the price of gold,it should definitely form a part of ones portfolio, he says. Your investments in gold should be held for more than three years. And always have a price target. The moment the target is attained,and book your profits, says Varma.

Just as one buys a term policy to insure life,gold works as an insurance for ones financial portfolio because it tends to do well when equities do badly. So,continue buying gold in small amounts and for the long term. But do not be over-optimistic about returns. In the long run,returns from gold tends to exceed the long-term inflation rate by just one or two percentage points.