Is Buying 100g of 24ct Gold Biscuit a Good Investment? Diversification and Risks in 2023

If you have 5 Lakhs ($7,850) to invest, I would highly recommend diversifying this amount. A smart allocation of 50% in gold and 50% in equity is a balanced approach. Alternatively, if you already have a well-diversified equity portfolio without gold or silver, consider putting 3 Lakhs ($4,710) in gold and 2 Lakhs ($3,205) in silver. By spreading your investment, you can mitigate the risks associated with a single asset.

Why?

Price Dependence: The price of gold can be influenced by factors such as crude oil, inflation, the US Dollar, and most importantly, supply and demand. Many investors may panic-sell when the gold price starts to drop, indicating a potential depreciation this year. Interest Rates Recession: The continuous hike in interest rates suggests the possibility of a potential economic downturn or recession. With debt not dissolving and companies relying on consumer purchasing power, a recession could be around the corner.

Coming back to your question, one-year is considered a risky time frame because of the expected extreme volatility till mid-2023. This period could see a decline in gold prices, but it could also experience a rally. Timing the market is nearly impossible, but let's take a look at the 2022 price chart of gold for one-year.

Gold Price Volatility (2022):

In 2022, we observed a good rally followed by a sharp decline, erasing 16 months of profit. This volatility can significantly impact short-term returns. However, from a longer-term perspective, as evident in the 5-year chart, there are more opportunities to invest. Thus, it's essential to adopt a long-term investment strategy. If gold rallies before the one-year tenure, you may consider selling at a profit or act accordingly.

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No, Investing in Physical Gold Carries Additional Storage Risks

Instead of purchasing physical gold, it is advisable to invest in mutual funds or the stock market. This approach minimizes storage risks and allows you to explore various investment avenues for better returns. By diversifying your portfolio, you can protect your investments and ensure a more stable financial future.

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