Analysts Call: Gold's Returns to Remain Lumpy

SEATTLE (Scrap Monster): HDFC Securities, in its latest research report, states that gold’s returns are likely to remain lumpy. However, it is unlikely to deliver linear, regular returns as offered by regular fixed income instruments. Also gold will continue to remain as a reliable hedge against inflation. With regards to gold prices, the investment advisory group foresees sharp surge, after a few quarters of lull.

The report notes that gold has emerged as one of the best performing assets, gaining 15% since the start of 2020. The rise is on top of the 25% annual gain in price during the previous year. The gold buying has remained buoyant till date, with escalating fears of economic recession due to coronavirus pandemic further boosting gold purchases. The investments in gold-backed exchange traded funds (ETFs) have been robust in the initial quarter of the current year.

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The sharp decline in U.S. benchmark equity indices along with all-time low bond yields are likely to result in negative interest rates in the country, which in turn may turn out to be supportive for gold prices. HDFC Securities continues to remain bullish over the long term and advises investors to allocate 7% of the total portfolio value to gold at this point of time. The exposure could be increased further, in case of further economic deterioration.