Is Investing in Gold Good for GCC Expats?

Investing in Gold
Investing in Gold is an excellent investment choice ; many of us have missed it earlier. Lets try to understand with number how good an investment it is...

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Gold Investing

Now a days almost all of us have heard Gold being an excellent investment choice and many of us are regretting not investing in it earlier. Lets try to understand mathematically how good an investment gold could turn out to be for us i.e. GCC expats.

Taking on same methodology, as in last blog, lets assume we have invested AED 5,000.00 per month in gold. Given that we can easily buy Gold from local market and do not have to incur cost and loss of foreign exchange, is a big plus for gold.

Between Jan 2010 and Apr 2020 we would have invested AED 620,000.00 in gold. In Jan 2010 gold was hovering around USD 1,150 per ounce, in April 2020, during the height of the crisis it was at USD 1,761. Recently gold has seen a further surge taking its price closer to USD 1,935 (as of 4th Sep).

Return from Gold Investment as of Sep 2020
Investment CycleMonthlyInvestment HorizonJan 2010 to April 2020
AmountAED 5000/MonthDay11th of every month
Total Investment(AED)620,000Total Investment (USD)168,800
TaxNil  
Return basis Sep Gold Price(USD 1,935/Ounce)
Investment (AED)Value (4th Sep Price)ReturnIRR
620,000874,923254,9236.12%
Table 1: Return from Gold Investment as of Sep 2020

I guess anyone will agree that it’s a very good return with a comparatively easy to transact and reasonably safer investment as Gold. The only caveat being that if  you see the return just six months back i.e. Feb 2020 when gold price as around 1,575:

Returns as of Feb 2020
Return basis Sep Gold Price(USD 1,575/Ounce)
Investment (AED)Value (11th Feb Price)ReturnIRR
620,000712,56192,5612.50%
Table 2: Returns as of Feb 2020

So, if one would have not been patient enough and exited its position before the recent surge then the returns has been subdued. But timing the market is a very difficult proposition and almost impossible for retail investors. And hence all our investments should be with a very long term horizon, like 20+ years. With such a horizon we should be able to see good returns from Gold as an investment.

Though Gold might prove to be a good investment for GCC expats in current times but it carries the concentration risk of single asset quality and slow growth during time of low volatility. Accordingly it may consist as some part of our investment portfolio but we must not put all out investment in gold only.  Diversification into other asset class is the best strategy to hedge risk and earn decent returns.

Will meet again with an interesting investment option to diversify our portfolios to maximum possible extent. Till then happy investing!

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