InvestorQ : Can we increase exposure to gold if markets get volatile beyond a point?
Bhavik Nehru made post

Can we increase exposure to gold if markets get volatile beyond a point?

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Niraj Mehta answered.
2 years ago

If you track the price of gold, it follows a very curious pattern. It normally tends to outperform other asset classes when the uncertainty surround the macroeconomic or geopolitical situation is the highest. Look at some classic examples. Post-1981, gold saw a 10-year rally when the price of gold actually went up 30 times due to global geopolitical uncertainty. Then, post the Lehman crisis, gold again went into a major bull rally which lasted all the way up to September 2011. Lastly, we saw gold outperforming other asset classes in early 2016 when the macroeconomic uncertainty was high globally due to the Fed decision to hike rates for the first time. In any event of high volatility, gold becomes the preferred safe-haven asset. Today, there are options to own gold in a variety of forms including gold bonds, MMTC Digital gold, gold ETFs and gold futures; apart from physical gold.
There are two things to remember here. Firstly, gold is a hedge and not an investment. It is meant to just protect your portfolio in very bad and tumultuous times like 9/11, Lehman, Greek crisis etc. But you obviously cannot shift all your money into gold and it is not worth it. Normally, you have a range of 8-12% allocation for gold and the best thing you can do is to increase your allocation to gold closer to the upper end of the range in such tough times.