In 2019, gold has been the best asset class by a distance in India. It has beaten returns from shares, fixed deposits, and also real estate.
1-year returns of 14%
The 1-year returns from gold has been around that 14 per cent mark for gold ETFs. Physical gold on the other hand too has generated solid returns. 22 karats gold which was around Rs 30,650 at the local jeweller is now Rs 37,100 per 10 grams at jewellers in Mumbai.
Similarly, 24 karats gold has rallied from near Rs 32,600 on Jan 1, 2019 to Rs 38,100 currently. No doubt the asset class has been the best asset class and investors who invested in instruments like Gold Exchange Traded Funds (ETFs) have come-up as winners.
2020 may see even better returns from gold in India
It's likely that the bullish trend for gold may continue well into 2020. Firstly, the globe is flush with liquidity thanks to monetary policies of most central banks focussed on easing, which is likely to push gold prices even higher.
Secondly, in India it is likely that the rupee will continue to weaken against the US dollar. Remember, each time the rupee weakens against the dollar, it makes gold imports expensive and hence domestic prices of gold.
We are unlikely to the rupee gaining any meaningful strength in 2020.
A hedge against risk
The one important thing that gold investors should note that the metal is a hedge against risk. In 2019, the stock markets have done well and there were no such untoward incidents. It is unlikely that the same trend would continue.
Any geo-political tensions, could send gold prices spiralling upwards. Remember, there is the US-China trade tariff wars, worries over the US elections next year all of which could add to volatility in gold prices. It is highly possible that there could be some more room for gold prices to rally from here.
Global prices the best since 2010
We do not know how gold prices would end the year globally, but, at the moment global prices of gold are seeing their best rally since 2010.
Spot gold, which is now trading around the $1460 levels, is up by around 13 to 14 per cent this year. Interestingly, while gold and stocks tend to move in opposite directions, this year they have moved in the same direction.
This means that stocks have gained along with gold prices, which is a little surprising. However, when global liquidity is strong, it is likely to be the case.
For those who have not positioned themselves in gold, it would be a good idea to add gold to your portfolio. Remember, that it is a perfect hedge against any risk. The one thing that we would advise investors is to go for the Gold ETFs. They are traded in the electronic form are less risky and there is no fear of theft. The precious metal has generated good returns over the longer term and there is no reason why it would not be able to generate decent returns for investors once again. However, one would need to exercise some patience.