After a spectacular rally this year, gold prices in India has come down from the all-time high level of over Rs 54,000 to near Rs 50,000 level. It closed the week at Rs 50,700 per 10 grams.
Gold has been shining bright in the past three months. Due to the rally in gold prices, gold funds and gold ETFs have been receiving large inflows in the recent past. Gold has no doubt been one of the best assets classes with a return of 24 per cent annualised which renders others financial assets pale in comparison.
Gold price has risen 50 per cent in the last one year. Even over a slightly longer term, gold has delivered 11.7 per cent annualised CAGR return over the last 12 years, 9.8 per cent for the last 10 years, 12.3 per cent for the last 5 years and 16.7 per cent for the last 3 years.
According to brokerages and mutual funds, lately retail investors have been keen on taking derivative positions and investing in stocks and ETFs. Investors have been opening trading accounts in large numbers during the lockdown. Many of these investors are high net worth individuals. Due to lockdown and issues in physical deliveries, many commodity investors have also shifted to gold ETFs.
There is definite a changing sentiment of investors towards the yellow metal. As investment in physical gold comes with some storage cost due to security issues, investors are increasingly preferring other forms of investing in gold due to ease of investing and holding.
Gold bullion can even be bought online in India through an SIP (systematic investment plan) as it is considered a more affordable strategy. One can opt to pay a small amount on a monthly basis over a chosen period to accumulate its worth in gold. The gold purchased with each payment over a time, provides one a staggered pricing hence averaging the purchase cost. One can redeem the gold once the payment terms are complete.