Ever since the US Fed hinted that interest rates across the US could rise as early as 2023, gold prices have dropped. In fact, spot gold prices in India have dropped as much as Rs 5,000 per 10 grams from peak levels seen in November, 2021. Here are 6 gold investments that you can make as gold prices fall.
ICICI Prudential Gold ETF
Instead of buying gold, we suggest investors to buy Gold ETFs. They can be bought if you have a demat and trading account, just as you buy shares. These instruments follow gold prices, so when gold prices go higher, gold ETF prices go higher and when they fall the instrument prices fall.
ICICI Prudential Gold ETF has seen its prices fall from peak levels of Rs 54 to the current levels of Rs 41.78. The prices have fallen by more than 20%, which makes the instrument very attractive for long term investors.
We believe that in the longer term gold prices could trend higher, which could benefit investors who have invested in ICICI Prudential Gold ETF. Over the last 1-year this ETF has given a return of negative 3.74%.
HDFC MF Gold ETF
This is another ETF that has slumped tracking gold prices. Since gold rates have fallen substantially over the last few weeks, HDFC Gold ETF too has seen a price drop.
In fact, the ETF price, which was as high as Rs 53.26 is now trading at just Rs 41.91. At the moment gold prices have fallen over the last few months on account of a reduction in import duty in the Union budget and also a hint by the US Fed on interest rates rising by 2023.
When interest rates rise gold prices fall, as investors put money into fixed income securities and pull money away from gold. This makes the short term fall as a good buying opportunity in an ETF like HDFC MF Gold ETF.
Kotak Gold ETF
Those who invested a year-back in this ETF are now making losses. In fact, over the last 1-year this Gold ETF has given a negative returns of 2.2%. But, for those buying the ETF now, it could be a good bet over the longer term.
The fund size is around Rs 1,800 crores and the fund tracks domestic gold prices, which in turn track international prices of gold.
As mentioned, Gold ETFs track gold prices and if gold prices go higher, these ETF prices would go higher. Gold Exchange Traded Funds are a better bet than physical gold, as they are held in electronic form and can be easily bought and sold on the exchanges.
Nippon India ETF Gold BeES
This is another ETF that has fallen over the last 1-year, prompting us to suggest a buy on the ETF. The 1-year returns is negative 3.2%. In fact, it is one of the biggest Gold ETFs with sizeable assets under management of more than 6,000 crores. In case, you wish to buy, you can talk to your broker. It's important to remember that Gold ETFs like all other category of investments are taxable.
In the above, we have only mentioned Gold Etfs, because we believe it is the best substitute instead of buying physical gold. There is hardly any spread that is involved when you buy and sell gold ETFs. Let us explain. If you buy physical gold of 22 karats you would end up paying Rs 45,000, but, when you sell you might get just Rs 43,000 per 10 grams.
In Gold ETFs, as we watch the buyer and sellers, we find that ICICI Prudential Gold ETFs has a buy at Rs 41.93 and sell at 41.96, the spreads are so narrow, ensuring profits for investors.
SBI Gold ETF
In line with the trend of falling gold prices, SBI Gold ETF has given negative returns of almost 3% in the last 1-year. The year to date returns for the ETF is -7.07%.
For investors, who want to hedge their risk and diversify their portfolio the SBI Gold ETF may not be a bad bet. As can be seen from the data, the fund's performance is not too great. This leaves investors and opportunity to buy, because of the drop in value.
Axis Gold ETF
Axis gold ETF has hit a 52-week high of 53 and is now available at 40.98. This means the fund is available more than 20% below its 52-week high. Importantly it is very close to its 52-week low of Rs 38.39, making it a good ETF to bet on.
Those who wish to diversify their portfolio away from equities, this is not a bad bet.