As Dhanteras approaches, are you planning your next gold purchase? While traditional options like jewellery and coins remain popular, digital alternatives such as Gold ETFs offer a modern and convenient way to invest. With rising interest in these exchange-traded funds, they could be the smart choice for those seeking a secure and flexible way to add gold to their portfolio this festive season.
What are Gold ETFs?
Gold ETFs offer distinct advantages over physical gold, especially in convenience and safety. Unlike physical gold, Gold ETFs eliminate storage, theft, and purity concerns. They are traded on exchanges like stocks, allowing investors to easily buy and sell units. Moreover, they track the domestic price of gold, providing transparency and liquidity.
The current geopolitical scene further fuels investor interest in Gold ETFs. With escalating tensions in various parts of the world, gold’s status as a “safe-haven” asset has strengthened, making it a considerable option during volatile periods. Additionally, as investors seek to hedge against inflation and potential market instability, Gold ETFs provide a cost-effective alternative to holding physical gold.
Performance of Gold ETFs
In terms of performance, Gold ETFs have shown robust returns, rivaling physical gold. The average one-year return for Gold ETFs stands at 29.12 percent, with three-year and five-year returns at 16.93 percent and 13.59 percent, respectively.
Notably, the LIC MF Gold ETF led the pack with returns of 29.97 percent over one year, 17.47 percent over three years, and 13.87 percent over five years. While these returns are slightly lower than those of physical gold, which delivered 30.13 percent over one year, 18.03 percent over three years, and 14.88 percent over five years, the ease and safety of Gold ETFs make them a highly attractive investment option.
“Gold ETFs are ideal for investors with a short- to medium-term horizon,” said Ravi Singh, SVP – Retail Research at Religare Broking Ltd.
“A ‘buy-on-dips’ strategy works well, as price corrections can provide favorable entry points. In today’s market, where equities are fluctuating, allocating a portion to gold not only hedges against inflation but also helps balance risk effectively,” Singh added.
Goldman Sachs has also highlighted the potential for gold prices to rise further in their recent analysis. The bank expects gold to see substantial price increases due to the anticipated rate cuts by the US Federal Reserve, which would likely prompt Western investors to return to the gold market.
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