Invest in Gold Through SIP If Portfolio Allocation Is Below 10-15 Percent

Invest in Gold Through SIP If Portfolio Allocation Is Below 10-15 Percent

Gold prices, currently at 75,447 rupees per 10 grams in the domestic market and 2,689.6 dollars per ounce on the Comex, have risen 29.4 percent over the past year. Experts believe that supportive fundamentals may drive gold prices even higher in the next 6-12 months. The recent 50 basis points rate cut by the U.S. Federal Reserve has provided additional momentum for the yellow metal, which tends to have a negative correlation with real interest rates.

Chirag Mehta, Chief Investment Officer at Quantum Mutual Fund, noted that as real interest rates decline, the opportunity cost of holding gold decreases, attracting more investors to the asset. The potential for more frequent rate cuts by the U.S. Fed could further boost gold prices.

Geopolitical tensions, including the ongoing Russia-Ukraine conflict and instability in West Asia, are pushing investors toward gold as a safe-haven asset, according to Shashank Pal, Chief Business Officer at Prabhudas Lilladher Wealth Management. Additionally, central banks globally are diversifying reserves into gold, with any resumption of purchases by the People's Bank of China likely to support prices, as mentioned by Deveya Gaglani, Senior Research Analyst at Axis Securities.

A recent reduction in import duties on gold in India has also spurred domestic demand, leading to strong buying interest from both jewelers and consumers, as highlighted by the World Gold Council. Given these factors, Gaglani predicts that gold prices could rise by 4-5 percent over the next 6-8 months, potentially reaching 80,000 rupees per 10 grams domestically and 2,850 dollars per ounce on the Comex.

However, Gaglani cautions that a strong dollar index could hinder price increases, especially if U.S. interest rate cuts are modest and the economy remains robust. Positive economic indicators, such as non-farm payrolls and GDP growth, could dampen gold demand.

Experts recommend that retail investors allocate 10-15 percent of their portfolios to gold using investment vehicles like gold exchange-traded funds (ETFs) and gold fund of funds (FoFs). This allocation can reduce risk without sacrificing potential returns. Mehta advises against lump-sum investments following recent price increases and suggests a systematic investment approach to take advantage of lower prices during market fluctuations.