By Tensing Rodrigues
Gold has begun glittering once again. Gold prices were up over 20 per cent last month and silver has been keeping pace. Prices have reached almost six year high. Experts believe that the prices may continue to go up in the future due to the uncertainties in both the domestic and overseas market.
This is in keeping with the demand for gold. In good times when future looks bright, gold loses its sheen because there are better options to put your wealth in. When the stock market booms or property prices are on the rise gold has little charm. When business is going good and is expected to do even better going ahead why ever invest in a sterile asset like gold? Yes, gold is indeed sterile. It cannot generate value. But, when all the rest looks gloomy and you need a straw of hope to hold on to that is when gold comes into prominence. Because when everything is losing value gold will lose the least. In fact on account of its relative superiority it may gain value. That is exactly what seems to be happening at the moment. Investors are now rushing to gold as the store of value of the last resort.
Is it the right time to buy gold? It is because the gloom is still not too pervasive. So you can put a stop loss on your wealth by shifting into gold. Though today is not the best time to buy gold the day before, say during the last five years or so, when the investors shunned gold was the best time to buy gold. Yes, people would have called you a fool or a pessimist. But you would have been the wise fool. Let it be for the day before is gone. Now, before it is too late and everybody wants to hold to the same straw grab the gold.
As I have said before, gold is sterile. You cannot grow your wealth by investing in gold. So keep the gold only as a life boat and keep investing in equity. That is the where the power to create wealth lies. That is what fires the engines of the economy. Let gold be your backstop as you pump the accelerator. How much should you buy? Not more than 25 per cent of your portfolio not less than 15 per cent of your portfolio.
The global situation is not at all encouraging; nor is the domestic situation. But in no way it is reason to mourn or lose hope. Both globally and locally we seem to be in the midst of a structural change. It is wrong to look at a change as good or bad. Change is a change. It is neither good nor bad. The goodness or badness depends upon how we handle it. Change by itself is beyond our control. It is the only constant the only given. It is up to us to accept it as given and turn it to our advantage. The big mistake that we often make is forgetting that change is not affecting only us. Our fathers faced the same challenge so too our grandfathers so too the chimpanzees before them.
Globally we are experiencing something like the plate tectonics. Earth’s plates keep on wandering. They break, they merge, collide, gobble, they vomit every time creating a new map of the earth. In a similar manner the world map of economic and political power keeps on changing. And this is nothing new. It has been happening throughout history. Once upon a time the centre of gravity of human activity was in the sub-Saharan Africa. That’s because sub-Saharan Africa was not what we think of it today. It was the biblical Garden of Eden. That was may be 60,000 years ago. Some 50,000 years later the valleys of Tigris, Euphrates, Indus and Yangtze were the high points of human prosperity; and busy highways connected them. One was called the Silk Road; the other passed through the sea, via the Kathyawar peninsula of Gujarat. Some thousands of years later the centre of economic and political gravity shifted to Europe, then to US, then to China and so on.
These shifts are natural but they cause mighty pain. It is important that we do not mistake it for downfall. The same happens within the economy of a country as well. Businesses rise and fall. Death and decay is as natural to businesses as it is to plants and animals. Gold is for tiding over the pangs of change for uncertainty is inherent in all change.
*The author is an investment consultant. Readers can send their comments and queries to firstname.lastname@example.org