Gold down 17% this year: Is the yellow metal still worth its salt?

When it comes to being the world’s most coveted metal, there’s nothing that comes close to gold. And, India’s obsession with the yellow metal has world wide fame. Be it for personal consumption or for investment purpose, it’s almost hard to keep Indians away from the the glitter. “But should investors still believe in gold?,” screams a headline in today’s Business Standard.

According to the report, “Gold has dulled a lot lately but investors could still take a shine to it, say experts. Since the start of the year, its price has plunged 16.8 percent (in dollar terms). Institutional and hedge fund investors sold their holdings for opportune trades in other asset classes or in Japanese markets, even as US Fed Chairman Ben Bernanke hinted at cutting back quantitative easing while the dollar rose against major global currencies.”

This means global investors are finding investment opportunities in other financial avenues as a better option, resulting in large amount of gold being sold, which further leads to gold’s fall.

As far as homeland goes, things pretty much looked the same as retail investors went on a redemption spree and hence redeemed gold worth nearly Rs 77 crore and Rs 123 crore in March and April,respectively. Adding insult (price fall) to injury, even gold ETF’s assets under management dipped 11 percent since the beginning of this year, to Rs 10,629 crore.

So, is the yellow metal still worth its salt?

The answer is yes since gold is traditionally a safe haven investment and a hedge against inflation. According to the Business Standard report, it is also a hedge against the massive printing of money worldwide and the debasement of currencies. Simply put, this means, in the long run, gold will still be in demand.

So as far as investments goes, gold still should be a part of your asset allocation, may be you could bring down the percentage of gold in your total investment portfolio.