Gold vs Silver vs Nifty: Who is the 'profit king' in your portfolio?
Amid the intense volatility in the Indian stock market and the sharp decline in gold and silver prices from their respective peaks, investors may consider bottom-fishing these three asset classes. However, when it comes to portfolio diversification and asset allocation, investors may find it difficult to allocate funds across these assets. According to experts, investors struggling to allocate funds across equities, gold, and silver can use the old gold-silver ratio and the Nifty 50-gold ratio. Let us explain this in detail.
Nifty 50-Gold Ratio
Speaking on the percentage exposure to risky assets in one's portfolio, Pankaj Mathpal, CEO and MD of Optima Money Managers, said in a Mint report that the best way to allocate funds across risky assets like equities, gold, and silver is to subtract one's age from 100. For example, if you are 35 years old, allocate 65% (100 – 35) of your investments to risky assets and the remaining 35% to debt or risk-free assets. This formula helps reduce risk as you age.
Regarding choosing between equities, gold, and silver, SEBI-registered market expert Anuj Gupta said that one should first determine equities by looking at the Nifty 50-Gold ratio. Today, the Nifty 50-Gold ratio is approximately 1.63 (Nifty 50 closed at 25,571; MCX gold rate closed at approximately ₹15,700 per gram). Remember, if the Nifty-Gold ratio is less than 2.50, it indicates that gold is overweight and equities are available at discounted prices. Therefore, in the current market scenario, more money should be invested in stocks rather than gold.
Gold-Silver Ratio
Speaking to Mint on how to decide which bullion to buy, Amit Goyal, Chief Global Strategist at PACE 360, said that the COMEX gold rate today is $5,080 per ounce, while the COMEX silver rate is $82.345 per ounce. This means that the gold-silver ratio today is approximately 61.70. Remember, 80 is the pivot point in the gold-silver ratio. If the gold-silver ratio is greater than 80, silver should be preferred over gold. Similarly, if the gold-silver ratio is less than 80, silver should be preferred over gold. Since the gold-silver ratio today is approximately 61, gold should be considered before silver. He advised investors to use the COMEX price when calculating the gold-silver ratio.
Which asset class should you prioritize?
The biggest question is which asset class is best to invest in, given the current market scenario. Experts suggest that when diversifying your portfolio, it's best to invest as much as possible in equities. Then, invest in gold. Finally, you should consider silver.
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