Should you invest in gold during COVID-19 pandemic?

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While investors shy away from taking investment decisions during market volatility, gold is one option they usually look up to. Gold prices dropped to as low as Rs 44,000 per 10 grams during February and March, but with the rising Covid-19 infections the yellow metal has reclaimed Rs 46,000-47,000 mark. Gold, also referred to as ‘safe heaven’, is one of the safest investment instruments even during the worst times and appeals to investors across categories.

Return on investment

Last financial year, people invested heavily in gold and earned around 43% return. Gold imports that bear the country’s CAD increased by 22% last year. In August 2020, Gold prices hit an all-time-high of 56,191 rupees per 10gm.

Is it the right time?

According to Anuj Gupta, IIFL Securities Vice President, Research, this is the right time to invest in gold as gold prices will hit the 50,000 mark around Diwali. If there is a family wedding on the calendar then you can invest in physical gold otherwise paper gold also has plenty of options.

Gold ETFs & Sovereign Gold Bonds

Investor interest in paper gold has increased recently. According to Association Of Mutual Fund (AMFI), in FY21 the gold ETF inflows stood at Rs 6918 crore versus Rs 1613 crore in FY20. You can buy gold units for as low as 50 rupees through ETFs, they work like any other mutual fund. Besides, interest benefits can be availed on sovereign gold bonds.

Last year due to the pandemic-induced lockdown, jewelry shops remained closed during the gold shopping festival – Akshaya Tritiya. Anuj Gupta believes this year the shops might be closed during this festival but still there are going to be less losses as most jewelers have started selling online. Pre-order for marriages also have started coming in, so even if the shops are closed, there won’t be huge losses, Gupta said.

Watch the full interview here: