Gold is a good hedge against equities and is often used as an insurance to equity holdings. In past, even in extremely negative scenarios, gold has performed well. It is therefore advised that one should always hold some gold in his/her portfolio.
Gold is a very popular metal; mostly it is accumulated in the form of Jewellery. However, this is not an ideal mode for an investment considering the transaction costs. A retail investor should consider investing in Gold via virtual ways i.e. Exchange Traded Funds and Mutual Funds that invest into gold mining companies through an overseas fund. One should bear in mind that Gold Mining Funds can be volatile due to exchange rate risk. Therefore it is suggested that they invest in the companies which deal in Gold rather than directly investing in the base metal; Companies are subject to market risk that is much larger than that of a commodity like gold.
