Gold Prices Are Fluctuating: Should Investors Trust Gold Now?

Gold is a very relevant portfolio asset, globally. But some investors seemed concerned about the price fall of gold this month, or the rate of price hike - they thought it not good. Dominic Schnider, Head of Commodities and Asia Pacific foreign exchange at UBS Global Wealth Management CIO Office commented on gold, "If you have a tactical position, get out; if you have a strategic position, hedge it. In a world that looks better, why would you want to hold so much insurance asset, and that simply means the market needs to balance at the lower level."

He additionally suggested storing platinum because of its better industry exposure. This certainly can be an outlook but the view should also be analyzed critically. Is gold losing its significance in the global market or the situation is completely different?

Price rally

To understand this, one must remember that gold prices in the international market change every day. Any sudden price drop for one day or even one week should not judge the precious metal's potential. After going historical high last year, gold went down to Rs. 42980 for 10 gram 22 carat gold on 29th March 2021. This rate was significantly low for gold in India this year. Even then investors started to doubt the metal's future values. However, it overcame. The prices have jumped 0.63% on MCX today (17th August, 3.47 PM IST). It saw Rs. 296 absolute price hike since yesterday's price drop.

As it is reiterated, the metal's value should always be considered in long term. People who had invested in gold during late March on MCX certainly got the fruit later. Now the prices are high again compared to that time.

Gold promises a better prospect

Just like that, even if the gold prices are not seeing record highs now, the metal will show its result after few months. Profit from gold is generally considered in a 3-4 years time period. Also for Sovereign Gold Bond (SGB), issued by the RBI, investors are unstuck with it for 8 long years. It is assumed that the prices will be very high within 8 years. So, even if the prices of gold do not offer a better prospect in a short span, no reason to doubt it. It will surely perform better in the long term - as inflation is going high, people must trust gold now as an investment. They should put money in gold when they can. Gold rates will increase as a hedge. It will only depend on how sustainable the economic recovery is going to be down the road.