Gold Prices | Silver Prices: In uncertain times like these, up to 15% of your portfolio can be in gold: Prathamesh Mallya

Prathamesh Mallya, Deputy Vice President, Research, Commodities and Foreign Exchange, Angel OneHe says that in an ideal scenario, if you are a genuine, risk-averse investor who wants to diversify some part of your briefcase10% may be in gold. But in uncertain times like these, when there is a lot at stake, gold It is an asset that is recovering and there is no way to stop this recovery. In that case, the ideal allocation should be in the range of 10 to 15%.While we have seen gold prices rise and we are talking about the possibility of further increases as well, what proportion of an investment or portfolio should be made up of gold now? Is it a priority that everyone should consider? And what is your view on the movement of gold?
Prathamesh Mallya: If you look at the shorter time frame, in this particular year alone, gold has given double-digit returns. If you look at the shorter time frame, you would probably allocate a larger percentage of your portfolio to gold. In an ideal scenario, if you are a genuine risk-averse investor who wants to diversify a portion of your portfolio, it should be 10%.

But in uncertain times like these, when there is a lot at stake, gold is an asset that recovers and there is no way to stop this recovery. In that case, the ideal allocation should be in the range of 10 to 15%.

While gold has seen an upward movement, in the case of silver too, the trend is extending. What do you think about gold versus silver and how can we calculate both prices now? Would silver move in step with gold? Can gold yields give us something to watch for silver?
Prathamesh Mallya: When you make a comparison between gold and silver, silver is an investment and an industrial metal. With the demand coming from the industrial sector, both solar and green energy, the demand for silver would outperform over the next few years. If you look at the overall chart structure of silver or let’s say the equilibrium structure, it has been in deficit for the last four years. Even in 2024, it has been in deficit. So, if you look at the supply and demand, industrial demand and investment demand, this particular metal has more scope for much higher prices. But compared to gold, it lacks the per se perspective where the factors surrounding gold are much more capable of pushing up gold prices compared to silver. But then, if you talk about gold and silver as a metal, you should have at least 5% to 6% in your portfolio so that the ultimate allocation in these asset classes for precious metals is better compared to other asset classes.

The budget envisages a reduction in taxes on gold, which is expected to boost demand for the metal. On the other hand, gold prices continue to hover around an all-time high. Considering these two factors, how do you think consumer sentiment will be when it comes to gold, given that we are about to enter the festive season and the wedding season?
Prathamesh Mallya: There was a 9% tax cut and when it happened, the price of gold went down by 9-10% on that particular day. But after that, the gold prices had covered the extent of the fall, which means that they have already covered 10% and are poised to go up even further considering the factors surrounding this particular precious metal. But if we look at it from a price perspective itself, if you are a buyer and you go to a store and buy gold, it looks expensive at 73,000-74,000.

Those who buy physical and are possibly about to make jewelry have to wait for a price correction. But if you look at gold from an investment perspective itself, it is better to diversify into digital investment modes, specifically ETF (exchange-traded funds) and sovereign gold bonds. These two modes offer the option to exit when an attractive price is seen. Therefore, compared to physical gold, digital options are much better if you consider gold as an asset class from a profitability perspective.

When you look at investment methods, would you say an investor should buy gold, gold jewelry or ETFs? What is the best way to analyze this?
Prathamesh Mallya: In India, gold accumulation happens more on the physical side and is never looked at from a profitability perspective per se. This is because of the digitalisation of this particular asset class, specifically in gold ETFs and sovereign bonds, where a lot of people have diversified into this particular mode and are thinking about the returns perspective when they invest in gold as an asset. So, if physical gold is chosen over digital gold, it takes into account an individual’s perspective on risk and an individual’s needs and wants because, in India, a lot of consumption is physical. The profitability is never considered. But if we look at it from a profitability perspective, I think it would be better to buy sovereign gold bonds as compared to physical gold because it gives you interest at regular intervals; also, it is tax-free and you also get capital appreciation. So, these three in one asset class and the digitalised method is a better option as compared to physical gold.