Following the announcement of a cut in customs duties by the government in the recent budget, domestic gold prices fell by 6% to Rs 69,100 per 10 grams. Over the past year, gold has returned 21.10%.
“For investors who are yet to invest in gold, this autumn offers an opportunity to invest at much lower gold prices due to the reduction in taxes,” says Chirag Mehta, Chief Investment Officer, Quantum Mutual Fund. Another advantage of the budget announcement is the reduction in long-term tax incidence, which is now in the investor’s tax bracket at 12.5% after a two-year holding period. “This is a significant advantage from a tax perspective and should be a boon for investors, in addition to other benefits that investors will benefit from.” Gold ETF “To offer,” Mehta adds.
Analysts believe that gold helps diversify the portfolio and acts as a hedge against inflation, so investors should hold between 5 and 10% of it in their portfolios.
“Market uncertainty due to the US elections and the Federal Reserve’s policy stance are supportive factors for gold, where we could see capital inflows into gold funds. A rate cut scenario could boost investment in gold funds,” says Tapan Patel, fund manager at Tata Asset Management. Analysts also believe that strong economic stimulus from China could also boost investment demand in gold. So far, wealth managers preferred sovereign gold bonds as the government paid an additional 2.5% interest every year, there was no expense ratio and capital gains were tax-exempt on maturity. However, the last primary issue of sovereign gold bonds was in March 2024, and there has been no announcement on fresh issues this year, while the existing series of these bonds are trading at a 10-12% premium in secondary markets. “There is no clarity on whether there will be any fresh issuance of sovereign gold bonds.
“Investors looking to invest in gold should buy a gold ETF or mutual fund,” says Nikhil Gupta, founder of Sage Capital.
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