– Nigel Doolin, Head of Trading at Core Bullion Traders.
There is no doubt we are experiencing turbulent times for investing in gold. 2020 has only just begun and already we are in the midst of a worldwide Pandemic with COVID-19. One factor that may help people keep their head above water with their finances, is the fact that almost all of your regular investing can be carried out (and usually is) remotely. Whether buying gold or shares, you can do so from the comfort and infection-free security of your own home.
In turbulent times historically, gold has proven to be a safe-haven investment. Gold also serves as a good diversifier during market dips, since it enjoys a low correlation with asset classes such as equities. As we saw during the 2008 financial crisis, gold prices rose 28%, whereas the Nifty 50 (India’s market index for the Indian equity market) declined 52%. Similarly, in 2011, the Nifty 50 fell 24%, while gold prices rose 33%.
A judicious portion of your holdings in gold not only lends balance to your portfolio but also reduces risk. If you analyse the performance of a diversified portfolio (equity, debt, and gold) as against standard diversification (equity and debt), you will see that the combination of equity, debt, & gold can generate higher risk-adjusted returns than the other combination / standalone classes.
Turbulent times for investing indeed. But all of this pales into insignificance when people are worried for their safety. But keeping the wheels of trade moving is one of the cornerstones of society and we must do all we can to keep moving forward.
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