If readers can recollect, I had written a blog on 1st November 2018, where I had stated that Gold had entered multi-years bull run.

Let me reproduce what I wrote:

“I have a feeling that the downside cycle of Gold is over. It should start inching up in a slow manner. 2019 could be the beginning of the next bull cycle.”

Since then, Gold prices are up by 50 percent!

The coronavirus has brought a significant amount of uncertainty across the globe. Half of the world’s GDP is under lockdown.

No one knows for sure that the peak of the infection is behind us. Many leading institutions have predicted that most of the economies in 2020 will be in recession. This kind of projection brings in massive uncertainty on the economy. To revive economy Fed cut interest rates by 200 basis points in the last nine months with the rate now almost zero.

The scenario is making a perfect case for Gold to have a rally. It is not that gold prices have not moved up till now. It is up by 45 percent in the last 12 months (in India) when stock indices across the world are in red ink.

There are two things every investor should do during this uncertain time:

First, your equity portfolio should move into good quality stocks by churning weak quality stocks.

Second, allocate 10-15 percent to Gold as a part of an asset allocation strategy.

In the last few blogs, I have explained why you should move to good quality companies. Hence, I do not wish to bore with that. This time let me touch upon why you should be buying Gold.

Gold over the years has shown a strong correlation between economic outlook and Fed interest rate movement. Whenever there is a recession, economic uncertainty, and rate cuts by the Fed, Gold moves up.

Not many investors are aware that, like any other assets class, Gold also has its cycle-Up and Down. In the last cycle between 2001 and 2012, Gold moved up by 700 percent in 11 years.

Between 2012 to 2018, Gold moved down.

It looks the next bull cycle started in 2019 and likely to continue for many years. If not 700 percent returns, the current bull run can give 500 percent returns in the next ten years.

Many investors have already started relooking Gold as an investment class as ETF sees smart inflows. The data available on the website of the World Gold Council shows that the first quarter of 2020 saw net inflows of 298 tonnes in Gold ETF. In the first 17 days of April has seen further inflows of 112 tonnes. It’s a good portfolio hedge. Gold like equity is highly liquid, and one can convert into cash as and when needed across the world.

But there are few things investors must consider. India and China are the biggest importer of Gold. Due to coronavirus, demand has collapsed. At the same time, supply disruption is also observed as few gold mines suspended operations due to the virus. Suspension of flights due to coronavirus has hampered the movement of Gold across the world. So despite the demand contraction price of Gold moved up 14 percent in 2020. India is the price taker, and with the rupee depreciating against the dollar price, Gold moved up by 22 percent in YTD.

This uptrend is likely to sustain as the world is moving towards a “risk-off” strategy. I will not be surprised if Gold turns out to be the best performing assets in 2020. I am not alone in the camp of Gold bullish. Bank of America recently came out with a report suggesting that Gold can touch $3000 per ounce in the next 18 months.

In my last blog, I predicted that Gold would be in the region of $1325-1350 per ounce by the end of 2019. It overshot my projection and closed at $1500 at the end of 2019. I am taking the liberty to make another prediction. Looking at the global uncertainty, risk-off and Fed will continue with low-interest regime Gold prices should be in the region of $2000 per announce by end 2020. In Indian currency, appreciation could be high as rupee may depreciate against the dollar.

As I had mentioned in my last blog, I reiterate – investment through jewellery is not a smart option as it has making charges, impurity loss, and higher transaction costs. Instead, buy Gold ETF or RBI Gold sovereign Bond.

Just for the record, I usually follow what I preach. I have increased my allocation to Gold and may continue in the coming days.