Whether to hold or sell gold
With gold prices surging beyond the Rs 1 lakh mark per 10 grams for 24 carats this week, investors were left wondering whether they should continue to hold the yellow metal as the asset serves as a cushion against inflation, or if they should make the most of the bull run and book profits by selling their gold holdings.
Although the prices for 24 carat gold have since corrected and hovering around the Rs 98,500-mark, and the metal teasing with Rs 99,000 levels, gold investors are grappling with excitement and anxiety. Traditional Indian wisdom sees gold as an asset associated with security and status, but with prices touching all-time highs, pragmatic investors could think otherwise.
Whether to hold or sell gold — experts suggest that fundamentally the answer to this question lies in an investor’s goals. The yellow metal is fulfilling the intended purpose for those investing in gold as a hedge against currency depreciation and inflation. The current rally in gold prices mirror the global economic uncertainties, fluctuating interest rates and geopolitical tensions. And as these factors look like they’re here to stay, there’s a possibility that the gold prices could again touch and then go beyond the Rs 1 lakh per 10 grams mark.
Talking about the returns given by the precious metal and the expected levels in the near future, Deveya Gaglani, Senior Research Analyst- Commodities at Axis Securities, says, “Gold has delivered extraordinary returns this year — almost 25 percent in the domestic market and almost 30 percent in the commodity market, and technically, it is near the overbought zone. Talking about levels, Rs 99,500 is a strong resistance zone because once it nears the Re 1 lakh mark, there is a tendency to book profit at that level — hence, that can act as a strong resistance in the near term. But if prices sustain above this mark, then one can expect it to rise up to Rs 1,03,000 to Rs 1,05,000 levels.”
Household buyers, he says, can safely hold the precious metal and expect newer highs in the long run. “Most families have held gold for several years and they only buy and hold the precious metal. Also, any investor looking to keep gold for asset allocation or for portfolio diversification, can keep holding it.” However, he warns of a very high probability of price correction from the current levels and advises that investors can book gains by selling 30 percent to 40 percent of their holding and re-enter when there is a price correction.
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Gaglani adds that short term investors looking to make profit from their investment in gold can trail their stop losses as gold prices can scale newer highs. “Prices have corrected slightly and bounced back again. Wednesday’s low in MCX contract is approximately Rs 95,000. So, if someone has been holding gold from Rs 90,000 or from Rs 85,000 level, that can be a trailing stop loss,” he avers.
According to experts, it seems that the wisest path may be avoiding the “all-or-nothing” decision. Siddharth Jain, CFO of MinEMI, opines, “While many are tempted to sell because gold is at all-time high levels, most should pause before doing so. Unless there’s an urgent financial need, holding gold could be the wiser choice, as global cues — from sticky inflation to geopolitical risks — still support elevated prices in the medium term.”
However, for those still considering selling, experts remind that timing the market perfectly is nearly impossible. And a pragmatic approach could be to sell partially —book profits on a portion of gold holdings, while still maintaining some exposure. Saurav Ghosh, co-founder of online investment platform Jiraaf, says, “Gold was at an all-time high this week, growing 3X times in value in the last 5 years, and the prices could go up further given the continued global economic uncertainty, geo-political tensions, weakening of dollar etc., as seen historically. However, future returns are not always an exact reflection of historical data, especially with metals like gold. Investors who need cash immediately might sell now, while continuing with a certain portion in gold for hedging. For others, it might be a good idea to hold on to it, especially since most other assets are facing volatility given the uncertainty in the financial landscape.”