After the outbreak of war in the Middle East, there has been panic in the financial markets around the world. The recent attacks on Iran by America and Israel have made the situation even more tense. When the stock market opened on the morning of Monday, March 2, investors’ portfolios were seen in the red. But amidst this despair, there was also a class that made huge profits, whose money was invested in gold and silver exchange-traded funds (ETFs). In such a situation, it is natural to raise the question whether one should now withdraw money from shares and invest it in gold and silver?
Why are gold and silver ETFs touching the sky?
With the opening of the market, while on one hand major indices like Sensex and Nifty fell by about 1.4 percent, on the other hand, silver linked ETFs gave strong returns to investors. A huge jump of about 9 percent was seen in Angel One Silver ETF. Similarly, silver ETFs of Tata, ICICI Prudential and Axis rose by more than 6 percent. SBI and HDFC funds also recorded a growth of 5 to 6 percent. Gold ETFs also did not lag behind and were seen trading 3-4 percent above the previous closing price.
Actually, this rise in these funds is a direct result of the boom in the bullion market. The futures price of gold on MCX rose by 2.91 percent to a record level of Rs 1,66,816 per 10 grams. At the same time, silver also strengthened by 2.61 percent to Rs 2,90,188 per kg. According to Piyush Jhunjhunwala, founder of Stockify, whenever there is a war or a major geopolitical crisis in the world, people avoid taking risks in the stock market and start investing their money in safe places i.e. gold and silver.
Gold is a ‘true companion’ in times of crisis.
History is witness to the fact that gold has always been a strong shield against uncertainty, currency market fluctuations and inflation. Whenever war-like situations arise, stocks fall heavily, but the attractiveness of gold increases. Jayant Manglik, partner, Fortuna Asset Managers, says that the current tension has once again proved the importance of gold in investors’ portfolios. The advantage of investing through ETF is that people do not have to worry about physically keeping gold at home, and it also maintains liquidity and transparency.
Silver, on the other hand, behaves a little differently. It is considered a safe investment, but due to its huge demand in the industrial sector, it is more volatile than gold. During times of war, the price of silver rises more rapidly and sharply than that of gold. However, market experts believe that how long this silver rally will last will entirely depend on how long the war continues.
What should be the plan now?
Experts believe that this is not the time to sell shares out of fear or emotions. Prashant Mishra, founder of Agnum Advisors, advises not to take any hasty decision due to the news coming at the global level. In this period, it is most important to maintain the discipline of ‘asset allocation’. Don’t invest your money in just one place, distribute it in a balanced manner among shares, fixed income (debt) and gold. Also, keep enough cash aside for emergency needs. Instead of chasing bullishness, use gold and silver ETFs only to reduce the risk of your investment and provide a strong protection to your portfolio.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.