Gold has benefitted from the uncertainties in the global economy resulting from the spread of the pandemic. Uncertainties always give a push to gold prices as investors who flee excessive volatility take refuge in safe-haven assets like gold and dollar. Even otherwise, gold had a relatively good runduring course of the last one year mainly from the cut in US Dollar interest rates. The Fed policy turned soft after the fear of an economic slowdown gripped the US policymakers. In order to bolster economic growth and as a pre-emptive measure US rates were cut. This helped gold to make gains.
The persistent shocks from the ups and downs which characterized US-China trade war, the uncertainties that dogged Europe mainly on Brexit also fueled an enhanced demand for gold. The upward momentum in gold was fairly strong around June-July 2019, and it has been intact up till now from the base level of 1330 and 1390. Currently trading well above the 1600 level and making new highs around1700, gold has very good immediate support around the 1480, 1510 and 1540 levels.
Uncertainty premium is what has been keeping the prices high and this is going to continue till the conditions around the pandemic improves substantially. While this itself accounts for the current buoyancy, the demand from central banks and institutional investors remained robust during the whole of last year. The flow of funds into ETFs also resulted in support for prices at higher levels. It is imperative that portfolios should have a 5 % allocation, as part of basic allocation, to gold, at all times irrespective of the ongoing economic conditions.
There are three modes in which gold investments can be done, and they are Gold Funds, Gold ETFs and Sovereign Gold Bonds. Each avenue has its own merits, but all of them provide you with the exposure that you desire.
