Is this time to buy more gold or look at other options?

In an interview to CNBC-TV18, personal finance expert, Hemant Rustagi of Wiseinvest Advisors shared views on whether one should increase allocation in gold now, maintain status quo or consider other investment options.

Below is the verbatim transcript of Rustagi's interview with CNBC-TV18.

Q: With gold prices cracking, should investors be increasing their allocation to gold or maintaining status quo. Would you advice people to buy gold from the day's low today also a bit of recovery is seen or would you say there are other lucrative options like Public Provident Fund (PPF) or even bank fixed deposit (FD) given that inflation has now come down?

A: As gold prices have crashed investors are worried a lot because they are wondering what to do. There are mix reactions coming from investors. On one hand investors who are not very sure as to what to do with their existing investment in gold and on the other hand there are investors who are wondering whether this a great opportunity for them to make a quick buck.

I think the key factor that investors need to consider at this point of time is that the reason for which they have been investing in gold and the reason for which they want to invest in gold at the current level.

I think gold has an important role to play as far as any investor portfolio is concerned from the asset allocation point of view because it not only has negative correlation with other asset classes, but also allows investor to take it as a hedge against inflation over a period of time.

Therefore, it is very important for investor to look at reasons for which they have been investing in gold; in fact there are investors who have gold in their portfolio, to accumulate it for a special occasion in their life, their children marriage.

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So, my view is that any investor who has been investing in gold in a disciplined manner over a period of time with defined time horizon and goal, they can continue to hold on to the investment and also continue investing because they can then benefit from averaging.

However, as far investors who are looking at this as a great opportunity to make a quick buck, need to remember that making any ad hoc decision based on the recent, past performance of any asset class including gold can backfire because gold prices can correct even from these levels and the recovery may not happen soon. Therefore, all those investors who invested in gold in the last one-two years trying to benefit from the price momentum in gold need to prune their exposure to gold and look elsewhere.