Buy and hold gold in 2021: Experts | Economic Times

KOLKATA/MUMBAI: Savers buying into gold in 2021 should hold the investment over a longer time horizon to get the desired levels of returns as the pace of vaccination, expected to begin early next year, gathers momentum and dims the allure of the safe-haven metal in the short run.Hence, asset allocation to gold could decline in the New Year as wealthy individuals are disappointed with prices falling more than 15 per cent from their peak in August. With little signs of global inflation, when gold is bought as a hedge against a price spiral, wealthy investors are shifting to equities to benefit from a rebound in earnings growth.“You cannot keep moving from gold to equity and vice versa just based on what is performing at the moment,” said Suresh Sadagopan, founder at Ladder7 Financial Advisors. “You need to invest 5-10 per cent in gold without worrying about short-term price fluctuations. You cannot mix up gold and equities as it will bring losses for you. Gold investment should be on a 15-year time horizon.”Gold has returned more than 25 per cent since the beginning of 2020 as investors rushed to own the safe-haven asset amid a virus-induced global economic crisis. The US election and the uncertainty about the outcome also drove investors to buy into gold.With Joe Biden due to take over, the uncertainty has eased, putting downward pressure on gold and bringing down prices to ₹48,000 – ₹49,000 per 10 gm. 79946721Accommodative monetary policies from Washington to Wellington have driven yields to the floor, prompting an asset churn in favour of investments savers believe will help preserve their wealth.“Gold is precisely one such asset,” said Kshitij Purohit, lead commodities & currency at CapitalVia Global Research. “We expect further weakness in the dollar index. This is due to zero interest rates until 2023, which will continue to support global liquidity.”But equity markets, too, remain attractive to investors, prompting many of them to shift from gold to equities for better returns.“Equity should outperform gold and fixed incomes in 2021,” said Binod Modi, head (strategy) Reliance Securities.BSE Sensex, the broader barometer, jumped more than 14 per cent in 2020. Gold prices surged by more than 40 per cent this year to touch the peak of ₹56,000 per 10 gm. Subsequently, prices corrected and are currently hovering in the range of ₹49,000 - ₹50,000 per 10 gm.To be sure, some experts see gold as a passive investment. “Gold per se does not produce anything,” said Joydeep Sen, consultant with PhillipCapital fixed income desk. “In equity, corporates are producing something and in debt, there is a committed coupon.”