the systematic investment plan route to invest in gold and had invested an equal amount on 15th of every month, then you would be sitting on a comfortable return of close to 9 per cent.
A comparison of returns generated by various asset classes over the last six month shows gold outperforming equities and all other asset classes except for international equities. While gold funds on an average have generated a return of 13 per cent, the BSE Sensex in the same period rose by 8 per cent and the average return generated by large cap equity schemes stood at 5.9 per cent. International equity schemes however generated an average return of 17.4 per cent in the same period.
Current environment and gold
In the period between May and August rupee depreciated sharply against the dollar by over 20 per cent and has therefore led to a sharp rise in gold prices in rupee terms. It however regained some of its lost ground over the last 6 weeks on the back of US deferring its tapering plans on its ongoing quantitative easing program and the Reserve Bank of India taking several measures to bring down rupee volatility and dollar expenditure. But market experts believe that rupee may continue to remain weak and if that remains the case, gold is a decent place to remain invested in.
"For India to remain competitive in the world market, the rupee will remain at depreciated levels and if it depreciates further over the next three years to gain competitiveness, then gold investment will not only generate healthy returns but also provide investors a hedge against rupee depreciation," said Ritesh Jain, CIO, Tata AMC.
However, there are others who think that globally the momentum is not building for a significant uptick in gold prices and therefore the upside is limited in the near term.
"We are not seeing investment demand for gold flowing in and there is not much of fund participation too. Thus we believe that gold does not have much of an upside from the current levels over the next few months," said Rajini Panicker, head of commodities research