Protect equity market gains with 10-15% investment in gold

Potential rate cuts in the US this year could boost yellow metal's performance

- SARBAJEET K SEN

Equities, which are trading at high valuations and have also been volatile lately, pose the risk of periodic selloffs. In this environment, experts recommend diversifying portfolios.

That puts the focus on gold, which can act as an effective diversifier.

Experts say investors must have an allocation to gold despite its current price level of around $2,000 per ounce in the international market and above 61,000 per 10 grams in the Indian market.

Gold the stabiliser

When equities tank, gold generally remains steady and protects the downside. "Gold has a very low correlation with equity. It makes sense to have it in one's portfolio keeping the political and economic risks of 2024 in mind," says Vishal Jain, chief executive officer (CEO) of Zerodha Fund House.

In a good spot

The US Federal Reserve (Fed) has signaled it might lower interest rates this year, which could weaken the dollar as money moves out of developed markets. A weak dollar should, in turn, support gold prices.

"The US slowdown and the resulting Fed easing are likely to make conditions conducive for gold prices in 2024 as the attractiveness of competing asset classes diminishes," says Ghazal Jain, fund manager-alternative investments, Quantum Asset Management Company (AMC).