Gold outlook 2020: How retail investors may go ahead

Updated: December 20, 2019 11:40:00 AM

Gold has been the most favored asset class for Indians all these years, Indians prefer to keep it in jewelry form. 2019 has been a year for gold, with the yellow metal surging over 19 percent year-to-date, as against almost 12 percent returns for the Sensex.

import of gold, import of silver, RBI, DGFT, foreign buyers, exportersGold has been among the most seriously impacted asset classes by the US-China trade war and increased uncertainty, slow growth of the world economy and other macroeconomic events.

By Narinder Wadhwa

Gold has been the most favored asset class for Indians all these years, Indians prefer to keep it in jewelry form. 2019 has been a year for gold, with the yellow metal surging over 19 percent year-to-date, as against almost 12 percent returns for the Sensex. It touched a high of Rs 40,000/10 gram by October-end but has since retreated to the Rs 38,000 zones. In dollar terms, it hit a high of $1,565 per troy ounce in August-end.

Gold has been among the most seriously impacted asset classes by the US-China trade war and increased uncertainty, slow growth of the world economy and other macroeconomic events. Gold is a good asset class when there are risk and fear of recession in most of the countries in the world. Not just the US Fed, other central banks worldwide have taken an increasingly dovish stance, hinting at further rate cuts. This can also create a forex war as well. World central banks are reducing interest rates faster than expected and bond yields are falling steeply, to keep up demand in economy central banks will resort to currency printing and more quantitative easing.

Safe-haven assets like gold and other precious metals will do well in these uncertain times. Historically gold has been seen as a special and valuable commodity. Owning gold can be a good hedge against inflation and deflation alike, and a good portfolio diversifier. As a global store of value, gold can also provide financial cover during geopolitical and macroeconomic uncertainty.

Moreover, in any balanced portfolio, proper weight must be given to this yellow metal which has given steady returns and preserved wealth over the years. In my view, gold is a good long-term investment option. “Gold prices have been trending higher since 2015 low and this year notched a six-year high. The monthly gold chart at present is technically bullish and suggests the outlook for gold in the coming new year 2020 is for more of the same—trending sideways to higher in the coming months. Investment options in gold come in the form of gold funds and ETFs, digital gold and sovereign gold bonds in addition to the obsession of Indians to hold gold in the form of jewelry.

(The author is President, Commodity Participants Association of India (CPAI. The views expressed are the author’s own)

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