Gold at an all-time-high: Should you buy, hold or book profit?

Domestic gold prices continued to reach higher on September 9, surpassing previous highs to touch Rs 1.1 lakh per 10 gm in the futures market, tracking gains in international prices.

Gold futures with December expiry on the commodities exchange MCX hit an all-time high of Rs 1,10,400, while contracts set to expire in October hovered around Rs 1,09,000. Similarly, the rate for physical gold (999 purity) was closer to Rs 1,09,140 per 10 gm as per the India Bullion and Jewellers’ Association (IBJA).

Every time gold scales a new peak, retail investors face the same dilemma – sell, hold or accumulate more of the shimmering metal?

Navneet Damani, Senior Group Vice President and Head of Research for Commodities and Currencies at Motilal Oswal Financial Services said gold prices are now in the zone of exuberance. “Gold has risen 100 percent over the last four years. Retail investors who have been invested in the yellow metal for a long time can look at booking some profits now,” he added.

The overall approach, however, should be to follow asset allocation. “The recommendation is usually around 7.5-10 percent exposure to precious metals, with gold getting a higher share of the pie. At present, gold has run up very fast and very high in a short span of time. We believe silver has better potential to deliver higher returns now. Retail investors can look at allocating 5 percent to silver and 2.5 percent to gold in the current scenario,” MOFSL’s Navneet Damani said.

According an MOFSL note, silver too is expected to move towards Rs 1.35 lakh followed by Rs 1.50 lakh on the domestic front (assuming US$-INR at 88.5). “Long-term support levels are placed near Rs 1,04,000–1,08,000, with buying on dips recommended over a 12–15 month horizon,” the report said.

Also Read: Gold rate today: Yellow metal at record high, check latest prices in your city on September 9

Those who may have missed the mega, multi-year rally in precious metals can still look to invest in gold in a staggered manner. “You can accumulate gold even now – start with an SIP in gold ETFs. We believe the prices will remain firm due to the current global environment. The risks are shifting to fiscal issues from geopolitical ones,” said Srikanth Bhagavat, MD, Hexagon Wealth.

Gold has been at fresh highs for some time now, and international factors that have triggered this rise are unlikely to ease in the near future. “A large part of the demand is coming from central banks across the world, particularly emerging markets. There will be reasonable demand for gold in the days to come, So, the prices will remain firm,” Srikanth Bhagavat said.

Hexagon Wealth’s Bhagavat is in favour of holding on to existing gold exposure in one’s portfolio instead of booking profit. “The yellow metal is like an insurance policy for your portfolio – a hedge against inflation and global risks – so it is wise to have an exposure of ten percent to gold,” he added.

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