Rising inflation has led to a sudden rise in gold prices across the globe and hence increased investor interest in gold ETFs and gold funds. US And CPI data around the world points to rising inflationary pressures, making investors skeptical of the “transient” nature of price increases claimed by global central banks.
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“The Federal Reserve says interest rate hikes are only expected until the end of 2022, which coupled with rising inflation translates into lower real yields and revived trading in gold. The world is terrified of the containment of inflation and the Fed underestimated multi-decade high inflation and made a policy mistake.Moreover, rising inflation is expected to impact corporate profits, with the global economic recovery- The rally in the stock market will suffer as well. This is good news for the yellow metal as investors will choose gold to position their portfolios for a stagflationary scenario, says Chirag Mehta, Senior Fund Manager, Alternative Investments, Quantum Mutual Fund. Do it.”
This year, the folio count in Gold ETFs has grown by almost 200% from 8.87 lakh in December 2020 to 26.6 lakh in October 2021. This indicates that gold has entered the investor’s portfolio as part of his asset allocation.
“So far in this calendar year, the Gold ETF category has received a net inflow of Rs 3,818.1 crore, leading to a net outflow of only one month, which was around Rs 61.49 crore in July 2021. Gold, at its best in the last few years With the performance. Years has attracted significant investor interest. The steady growth in their folio numbers is a testimony to the same,” says Himanshu Srivastava, Associate Director – Manager Research, Morningstar India.
In the midst of the stock market boom, mutual fund investors tend to forget about diversification and other asset classes. Fund managers like Chirag Mehta suggest that investors who do not have gold in their portfolios and want to diversify should do so now. Chirag Mehta says, “In order to benefit from the upcoming inflationary game of gold, and to diversify their portfolio against possible stock market corrections, new investors should consider their allocation to gold up to 10-15% of the portfolio in a disciplined manner. Can use falling prices to make up for it.”
For newcomers, gold funds and ETFs help your portfolio go through tough economic phases by providing a hedge. Given its ability to act as an effective diversifier, gold serves as a strategic asset in an investor’s portfolio. “This is where it attracts safe-haven appeal. During the challenging investment environment in recent times, gold emerged as one of the better-performing asset classes, thus proving its effectiveness in the portfolio of investors. This aspect has gone unnoticed by the investors, which is evident from the consistent net inflows into the Gold ETF category,” says Himanshu Srivastava.