'The current level of gold makes it an attractive investment'

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: Laxmi Iyer, head of fixed income and product, Kotak Asset Management, spoke with Abhay Rao of The Financial Express about gold investments and what is its importance in today’s scenario.

•What do you feel about the current gold market? Why do you feel it is more relevant today?

It is a little hard to accurately predict what is happening in the global scenario right now as we are amidst clear economic uncertainty. The global financial meltdown has created a major panic situation amidst investors the world over. In such cases gold takes up the safe haven role and hence buying of gold is currently up. This, coupled with unstable currency, leads to people preferring gold to other assets. Therefore, currently, the global market for gold is looking very good as it is an ideal time for investors to consider buying. Gold is more relevant today because of the uncertainty in the markets, currencies and inflation levels. The only hedge against these factors has always been gold and this makes this asset very popular and relevant in today’s times.

•What is the situation of gold in India? How relevant are the economic conditions in the country in terms of gold price movements?

In India, broadly speaking, people are very price sensitive to gold. Even the current gold market movements in India seem to be following a contrarian trend. Here we have seen redemptions in the gold ETF market, while the world over, people are adding to their gold holdings. Ideally, gold should be used as a term cover, like insurance covers for health, life, etc. This is mainly as it has a negative correlation to all asset classes. Thus people should use it as a hedge. Gold has the ability to perform too and deliver returns. However, one should not buy gold mainly for the returns. I strongly believe that inflation is inevitable in India and abroad during the next few years and hence gold is once again going to be the best insurance and hedge against the current situation.

•How would you ideally invest in gold in India? Why would you choose one investment vehicle over another?