Gold as Hedging Tool

What could be the most effective hedge during financial instability and in times of geopolitical uncertainty? The answer obviously is gold. Gold is also considered a safe haven against currency devaluations or any other crises. There have been many instances of war and political tension in the past where gold always proved to be the most trustworthy asset. Recently gold prices have bounced back and climbed 8.9% this year due to increased possibility of a war breaking out between Russia and Ukraine. This is after a 28% plunge in gold prices last year. Also, two of the world's biggest gold buyers i.e. China and India continue to spurt the gold demand. In fact, imports by India more than doubled in March 2014 as compared to February 2014, as per government sources. This is notwithstanding several measures adopted by RBI to curb gold imports. Considering its safe haven status and inflation hedging capability, we urge investors to have at least some allocation to this yellow metal in their portfolio.