DSP Asset Managers have announced the launch of DSP Gold ETF, an open-ended exchange traded fund (ETF) that replicates and/or tracks domestic gold prices.
DSP Gold ETF’s new fund offer (NFO) opened for subscription on April 17, 2023 and will close on April 24, 2023.
DSP Mutual Fund said in a press statement that this new ETF will offer investors the freedom to trade gold more easily now, which is actually a good time to buy gold because of macro factors suggest.
Weakening of US dollar and flat equity markets extended gains in gold prices on April 17, 2023. According to experts, the price of 10 gm of 22 carat gold may hit the Rs 62,000 mark in April.
According to DSP Mutual Fund, this product is ideal for investors seeking long-term capital appreciation.
“You must maintain a long-term (7-plus years) outlook to maximise your return potential,” DSP Mutual Fund said in a press statement.
As a prudent approach to long-term portfolio management, a 5-10 per cent of one’s investment portfolio should be allocated to gold.
Gold ETFs track the price of physical gold in the domestic market. These are passive investment instruments that are based on gold prices, and invest in gold bullion.
Each unit represents one gram of physical gold, which is the minimum investment. Investing in Gold ETFs requires one to have a dematerialised account.
Should You Invest?
Gold ETF is held in a dematerialised account, so an investor need not worry about storage or security issues. Further, gold ETFs have high liquidity, as they can be purchased or sold on the exchanges during trading hours, similar to stocks.
Holding gold can also help one to smoothen his/her investing journey, as gold is an asset class whose prices typically move in a different direction from other asset classes. So when other asset classes fall, gold ETFs can offer some stability.
Also, investments in gold have typically done well at a time when there is a weakness in the dollar.
DSP Mutual Fund said in a statement, “With factors such as a global slowdown, the post-Covid jump in dollar and expected monetary easing, the dollar is expected to weaken going forward, which could start a multi–year bull market in gold.”
Also, with global liquidity drying up and the demand for gold investments coming back, along with the improvement in central banks’ holding, the fundamentals are strong for a bullish gold outlook.
However, being a cyclical asset class, entering at the wrong time can impact returns in the short term. An investor should expect short-term return fluctuations especially when gold prices have been rising for several months.
Says Anil Ghelani, CFA, head – passive investments and products, DSP Asset Managers, “Gold gives us an opportunity to hedge against a standard ‘equity-debt portfolio’ due to its low correlation with equity and often a negative correlation with debt as an asset class.”
Says Ravi Gehani, Fund Manager, DSP Asset Managers, “With China opening up their economy, and India seeing demand going back to pre-covid levels, jewellery and investment demand from the world’s two largest gold consumer nations is expected to pick up, building a good case for gold.”