Transcription
Gold has to be part of your portfolio, always. When you think that the world is going to collapse, gold is the final asset. So, the perfect recipe for gold is high inflation, low interest rates, and any financial or political uncertainty. Silver is that cousin of gold which is more volatile. So, gold became a constant value which doesn't really change.
Gold and silver, they are not just shining metal in your jewelry box, but they have been the heart of wealth, power, and security for centuries. But in today's fast-changing world, what do these precious metals mean to you as an investor? I'm Mansisha, your host, and today we are joined by none other than Keshor Nan, head of commodities at Motilos. Together, we are demystifying the myths, decoding the market moves, and giving you a clear perspective on gold and silver. So, let's dive in. We are very confused, and we need you to guide us on what's really happening in gold and silver.
Not a big scope of confusion here, because, uh, gold and silver have been, uh, performing very well as an asset class for quite some time. Increased in the last few days. If you look at 20 years from here, or 25 years, let's say 2000 onwards, um, the equity market returns, uh, uh, if you compare with returns on gold, um, so gold has outperformed from there. Last 20 years, again, gold has outperformed equity returns. Last 5 years, gold has outperformed equity returns. So, I'm not, uh, uh, uh, exactly comparing Apple to Apple, but, uh, uh, look at, uh, benchmark indexes. Most of the benchmark indexes compared to gold have not given that kind of returns. That's actually creating a lot of buzz. So, gold only, or even silver?
Silver, actually, is not a reserve currency, actually, or reserve asset, actually. People, you cannot really trust silver. Silver is highly volatile. Uh, at times, it gives you phenomenal returns. At times, it gives you higher risk also. So, it's not the, it's not the calm gold. It's the volatile, uh, uh, metal. So, um, so that's why governments won't prefer it. Typically, if you're an investor, you might prefer it because in an upside, it'll give you additional returns. But gold is not like a financial asset. So, financial assets are very different. Uh, so if you go to capital markets, capital markets are wealth creation assets. They always, uh, expand, uh, as the, as the companies you invest grow, as the economies grow, the, the balance sheets will grow, profits will grow. So, the share prices again grow, and you, you overall create a larger wealth perspective. Second, uh, gold, uh, is not a financial asset, uh, because it acts more like a currency rather than an asset. Till, uh, uh, post-Second World War, uh, gold was the currency, and all the currency which was printed in the world was nothing but a representation of gold. This is a paper format of gold. So, for the convenience purpose, people converted that into paper or coin or representation purposes. But then, uh, post-Second World War, actually, it was, uh, money. The global, uh, economies needed more money. Federal Reserve, which is the central bank for us, has been printing money since 2008, 2009, uh, and recklessly printing all those things. Why they print money? Because when the economy is down, somebody has to supply artificial currency, right? Lend money to everyone so that they get over this crisis. And at some point of time, when the economy is back on its feet, they actually blow back this money from the economy, right? This is not possible with gold because the amount of gold available in the vault cannot be increased artificially. The necessity to detach currencies from gold came into play, and the Bretton Woods agreement, which used to be there as a currency backup, was broken. So, the gold lost its value as currency and detached itself as an asset. Uh, so what happens is, as we gone into this modern, uh, monetary economy, where, uh, central banks control your interest rates, central banks control money supply, how much money is there in the economy or not? They sometimes pull back all the money. They sometimes, uh, put a lot of money depending on the economic cycles. So, you had 2008 when, uh, uh, US banking system collapsed, uh, uh, and when Lehman Brothers gone bankrupt, there was a huge collapse. After the 2012, uh, European economies collapsed when Portugal, Greece went into problem. 2012 to 2014, 2016, then 2020, COVID came, everything, uh, uh, gone bad. So, you'll have these boom-bust cycles. So, the currency used to manage these boom and bust cycles, and gold became a reserve asset. You can't spend it. So, you have to hold it. So, buy and hold, uh, is the kind of a scenario. So, it will not expand the way other financial assets will expand because financial assets like stocks, bonds, all these financial assets are priced in currency, which is you can print anytime, and you can actually, uh, uh, take it back anytime. So, gold became a constant value which doesn't really change. So, a lot of times, then you can ask me that, why the price of gold changes? I give you, uh, this example a lot of times. Uh, you measure, let's say from here to that part, roughly, uh, let's say 10 feet, right? You measure this with a 1-foot scale. The distance is one, 10 feet, right? The, the distance is 10. Now, in number, if I break the scale into half and give you the piece and measure, how many units it will be? 10 becomes 20 units. The same distance didn't change, right? What changed is the measure. Right? The measure is now half a feet because the scale is broken into two. If the rupee value shrinks, depreciation, the measure has shrunk. So, in the same measure, the value of the same has increased. That's what you see. That's the price increase of gold.
So, when is the correct time to invest in gold?
Rather than answering that question, it's more why than when. If you're in an emerging, uh, uh, economy like India, you have constant depreciation of your currency. Uh, why emerging market currencies depreciate? Because we grow much faster. We generate inflation. Second, uh, there will be, uh, the interest rate differential. If I keep my money in dollars in a dollar bank account, I get interest in dollar terms. Whatever the central bank of the US decides. If I put my money in India in a, uh, Indian bank, uh, our interest rate is decided by the Reserve Bank of India, whatever the rates which they set up. So, there could be some differential in between these two. If you adjust this rate of interest rate differential as well as the, uh, inflation differential, then you'll get the exchange rate fluctuation. So, if you have to avoid that, or you want to defend yourself against inflation, gold is the only way you can do that.
All this war situation, how is it affecting gold?
So, whenever something uncertain happens like a war, like a possibility of a global, uh, something like a havoc, including something like COVID, anything which is, uh, uh, bad news becomes a good news for gold. So, gold is a doomsday asset, which we call it as simple funds across the world. It could be hedge funds, pension funds, uh, uh, investors, including retail investors, actually tend to move their some of their asset to gold because if they're anticipating, due to the war and geopolitical uncertainty, if the equity markets or global capital markets might get disturbed and might not perform, except some businesses which are war-related businesses, defense and all. So, in anticipation of a stock market correction, people want to book profits there and move to something else. What is that something else is generally gold, right? So, if the interest rates are far higher, if, if you are getting, let's say, double-digit FD interest, then gold will not be a preferred asset. Then people will go to FDs, right? But if FDs are also, or the, uh, interest rates are lower and there is uncertainty, there'll be far more demand for gold, right? So, the perfect recipe for gold is inflation, high inflation, low interest rate, and any financial or political uncertainty. If you put all these into a mix, then gold will explode.
There's this EV, EV cars, EV surges going in the market. So, how is it affecting the demand of gold?
So, I think, um, both gold and silver are been very actively used industrial metals as well for the last, uh, decade or so. AI revolution started, and chip revolution started. Uh, both gold and silver, and the solar and, uh, what do you call, um, renewable fuels, uh, industry has started. So, silver actually benefited from that. A lot of gold is used in chips and circuits, and especially where the touch points is. For example, whatever the mobile phone you're having, u, where you plug in your, uh, connector, uh, the tips are plated with gold.
Gold. Yeah.
Right. So, your charger tips are plated with gold. There are a lot of internal connections and circuit boards which are plated with gold because gold is the best conductor of electricity. And silver comes into play when you have into renewable energies. So, when you actually have a solar plate, where, where you capture solar energy and convert that into electricity, uh, the entire coating is silver oxide, uh, coating. So, in a larger things like, uh, like electric vehicles and all, uh, there's a lot of silver used as a, uh, as a this thing. And an EV is a high-tech car also compared to your general this thing. So, it has more chips, it has more computing power, it has, it has built-in computers, actually, right, to manage this power, etc., etc. So, that actually has more demand for that. Uh, so this is contributing as an additional demand for the metal. And after, after many decades, actually, uh, we are seeing since last year and this year also, the actual production of silver is lesser than the total demand. Right? So, that means demand exceeded the supply. So, we are consuming from the inventories which is there earlier. So, how you get this inventories out of the warehouses is you have to pay them higher. So, that means the price will increase further and further. So, yeah, fundamentally, silver is also bullish because the supply is lower than the demand, and that's going to continue for next year as well. So, silver actually is much more bullish than gold, but silver doesn't act like a safe haven asset because silver is more volatile. People don't like when you, the safe and volatile, both don't go together, right? The gold provides the safety aspect, where silver provides your returns aspect.
So, any other metal would you recommend, or metal or commodity to invest in?
So, apart from gold, silver, actually, we are also looking at copper, uh, as looking very good. Copper is looking very good again. As I said, uh, um, it's close to around $10,000 at this point of time. Uh, it's looking great. U, probably, even the inventories are coming down. The, uh, production. So, a couple of mine shutdowns happened recently. One of the Chile mine has shut down because of the accident which had happened. So, there will be, next couple of months, copper will be an interesting commodity to watch for, and, uh, we're bullish on that as well.
Okay, and what are the future predictions about the commodities?
Uh, gold and silver, we are, uh, uh, quite bullish even at current levels. To I guess, silver terms around 50 to $55. Silver Indian market, that will be around 1 lakh 55,000, 1 lakh 56,000, roughly. So, that's the silver, uh, for you, around 25 to 30% from here. Uh, gold, actually, is a tactical asset and a strategic asset, actually. Returns in, because you're holding gold incidentally, returns. But generally, people should not be investing in gold for return purposes because it's a part of your portfolio investment and portfolio insurance. So, up, if you are, uh, if you are a high-risk investor, you can have 85 to 95% also in, uh, high-risk assets like capital markets. But, but if you are a medium-risk investor, 15% gold. If you are a low-risk investor, 25% gold. So, but gold has to be part of your portfolio always, despite whatever wherever it is, right? But as we all want to, uh, know the, uh, upset trajectory. Uh, my thing is probably in 18 months, you should be getting around $4,500. That's around 30% higher from here. Uh, Indian market, may 30% will take you to around 1 lakh 35,000, something, uh, in, in, in gold. Uh, given that, I am also suspecting, uh, or expecting that rupee will further depreciate, probably towards around, uh, 90, 90 and a half, 91. So, that will actually give us slightly more. Because if you're looking at even current year, January to today, globally, the, uh, gold market, gold prices went up by 30%, 29 and a half, roughly, is 30% till yesterday. And in Indian terms, that is in rupee terms, uh, again, January to yesterday, gold went up by 40%. So, 30% in dollar terms and 40% in Indian terms. That means there is that additional kicker which has brought in India by rupee depreciation. So, roughly around 2.5 to 3% rupee depreciated from January to till date. But that has given you additional 10% returns in, uh, in domestic terms. So, that's actually a fabulous return, uh, in, uh, u, roughly 8 months, 40% return this year. And we're looking at next, again, don't look at 2 months from here. I'm saying look at at least 12 to 18 months from here. You'll get another 25 to 30%. Whether I should buy now or, uh, when to buy, rather than because when we are actually, the purpose of gold is to stabilize your purchasing power, to stabilize your long-term, uh, wealth, and a diversification factor. So, nobody actually puts 100% of their money into gold. So, you're buying some mutual funds, you're buying some, uh, insurance, you're buying various other asset classes. So, you general principle is you have to buy at least, you should have 5, 10, 15% of your portfolio into gold as an insurance to the portfolio itself. So, in bad times, gold will not perform bad, but though your financial assets will crash. It might go down by your, uh, equity markets go down by 25, 30%, 40%. But gold will never go down by that much. So, it will give you that insurance and safety. So, whenever you're buying gold, it's always for long-term rather than, okay, whether should I buy now. So, if you're, if you are buying now for the next 10 years, absolutely no problem. If you're buying for next couple of months, then there could be a problem because when any asset rallies by 30, 40% in very short time, there could be 5 to 10% corrections any, any at any time, right? So, the corrections can come 2, 3 months down the line.
What's the best way to buy gold?
If it is a financial, uh, accumulation for a very long time, I can buy a coin and keep it, right? Or a bar, or 100g bar or coin and keep it. Or I can buy electronic gold, which is through ETFs. There are a lot of digital gold platforms today. All those things are available. So, if I buy a coin or a, or a bar, I have to pay gold price plus 3% GST. And in a coin, there is a little bit of making charges also. These two will be your wastage, typically. So, if you're buying an ETF or, uh, um, or any digital gold, you're, you're typically actually, you don't have a problem of storage. You don't have a problem of all those things, and you can exit whenever it's possible. Second is, I have not seen people actually taking a coin and selling it, but it's very easy to sell an ETF because you don't really have that kind of emotional connect with that because it's a paper asset. So, if you are a tactical investor, you're looking for next 6 months, 8 months, 1 year, 2 years, ETF makes perfect sense. If you're looking for beyond that, then coins and bars will make a perfect sense. Though you and lock them up in your bank locker or whatever it is, and they're easier to hold. Whenever you want to exchange it for jewelry, you can take it to a jewelry store and exchange for your jewelry. It becomes very easy.
Right. So, now it's like a halt, all-time high. So, would you recommend to sell it right now?
Yeah. Again, the question is, uh, it depends, right? So, if I have bought gold, for example, again, I'm saying, so I have a lot of gold, uh, which was purchased at my, during my wedding, right? So, when we saying it was purchased at 6,000 rupees, 6,500 rupees, so should I sell? So, it became, right, multifold. Right? There is the purpose of that is to being a heirloom asset that is passed on from my mother to generation. We accumulated little more, it'll be passed on to my daughter, or maybe my. And so, there are some assets which I have, like, um, ETFs. I have sovereign gold bonds, let's say, right? So, those are assets which generally, if there are, so gold bonds, let them expire. They are typically 6 to 8 years maturity government bonds. Let them expire and let it. So, you don't need to sell them. So, if you have, if you're having gold ETFs, etc., probably you can hedge, uh, using some options that are available on MCX today. But I would suggest if your trajectory is more than 5 years, don't sell. If you have to get this money back in the next 6, 8 months, a year, or under the year, okay, you can go ahead and say that, key, you can book some profits. But long-term looks absolutely, uh, deadly from here. Also, we do a lot of research ourselves, and you can follow us on our, uh, uh, social media handles, as well as you can download our Rise app, and we have detailed reports. We have extensive coverage on, uh, both gold and silver, as well as other commodities, uh, per se. And we do a lot of, uh, event-based reports also. For example, if there is an FOMC meeting coming, or if there is some announcement coming from the US, we do a pre-event and a post-event both reports, uh, which are very small snippets to consume for, uh, even a, uh, uh, retail investor. Uh, so I think, uh, Rise app is our best source to get this information filtered and analyzed. Thank you for giving us a clear picture on what's happening in gold and silver and many other commodities right now. It was great having you here, sir.
Thank you, T. It's my pleasure talking to you and, uh, thank you very much.
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