Why you should invest in Gold ETFs says market experts

Gold prices have surged in recent years, driven by geopolitical tensions and increased retail investor interest. Retail investors have flocked to gold exchange traded funds (ETFs) and sovereign gold bonds (SGBs), with retail accounts in gold ETFs increasing significantly over the past five years to reach 48.4 lakh as of December 2023, according to data from the Mutual Funds (MF) industry apex body AMFI.

Gold ETFs are passive mutual fund schemes that invest in standard gold bullion with 99.5% purity, tracking the domestic price of gold closely. These ETFs are traded on stock exchanges and require a demat account for buying and selling. Notably, Nippon India ETF Gold BeES (Gold BeES) is recommended as an investment-worthy option.

Gold's safe haven status has made it a favored asset during times of market and economic uncertainties, such as the Covid-19 pandemic and the recent Russia-Ukraine conflict. However, experts advise using gold primarily as a portfolio diversifier, despite its strong returns in recent years due to geopolitical uncertainties.

Despite volatility, gold prices have steadily risen over the last five years, with central bank purchases and steady demand for physical gold being cited as key drivers. Vikram Dhawan, Head of Commodities and Fund Manager at Nippon India Mutual Fund, attributes gold's performance to excess money supply and low real interest rates. The increase in fiscal deficits to combat the economic slowdown caused by Covid-19 has resulted in excess money printing. Analysts anticipate that the prospect of low interest rates, potentially starting from late 2024, will further propel gold prices upwards.

Disclaimer: Make investments on the guidance provided by market experts to make informed decisions and potentially maximize your returns in the market.