Gold is one of those asset classes that evokes a lot of strong opinions among investors. Some investors consider it a must in any portfolio, while some think it is useless since it has no intrinsic value or cash flows (dividends etc), which some take the safe path and recommend a tiny 5-10% allocation. This question of whether you should have gold in your portfolio seems even more pertinent now given the doom and gloom economic scenario, which is when people say that gold performs the best. And true to that, Gold has been on a tear off-late.
I’m not a fanatic when it comes to gold, nor a gold bug. I don’t have a strong opinion either way. But nonetheless, I’ve been exploring if having gold in your portfolio makes sense. So, first some context on how gold has fared historically. Here’s Nifty TRI vs Gold (SPDR GLD ETF).
It’s hasn’t done too shabbily. But this is just a total return chart. Let’s look at the drawdowns
The volatility of gold can be gutwrenching. You need to ask yourself the question “Am I getting paid to take that volatility?”
Now, should you invest in gold?
I don’t know, you’ll have to go figure it out for yourself. Here are some amazing articles that are sure ot give you a perspective:
https://www.ssga.com/us/en/individual/etfs/insights/gold-can-shine-in-a-dismal-dollar-environment
https://www.ssga.com/us/en/individual/etfs/insights/gold-nuggets-upending-conventional-wisdom