This Akshaya Tritiya, HNIs look to quant-plate gold

Asset managers see demand picking up for scheme that uses quant tools to escape downside as prices get choppy

High net worth individuals (HNIs) are eyeing the yellow metal like they have done every year on this auspicious day. But this time, they are trying to protect their bets in the volatile gold market, where the upward move can no longer be taken for granted, with some quantitative tools. Akshaya Tritiya, the auspicious day in the Indian calendar, that has been turned into a gold shopping day by marketers during the gold rally years, falls tomorrow.

Some investment houses and wealth managers have floated gold-based designer products to suit the new-found volatility in the yellow metal. These products seek to capture the upside in the choppy gold market, while seeking to stay out of the fall. Till last year, buying gold was a blind call as the multi-year rally still had legs. Not anymore.

“Once the quant indicators signal a fall in prices, our managers liquidate their bets on gold and go 100 per cent liquid,” says Vikaas Sachdeva, chief executive officer, Edelweiss Asset Management, which is marketing one such scheme for its portfolio management schemes (PMS) customers. He says the scheme takes the emotion out of investment in gold. “Indians often find it difficult to sell gold. We do it for them.”

Managers such as Sachdeva do not see the return of a secular rally in gold for a while. “Gold is likely to remain volatile for some time now. This product is tailor-made for these circumstances,” he said.

In addition to cash, such schemes also accept gold-ETF units held by investors as investments. Distributors said the product has evoked significant interest and inquiries and expect investors to make fresh investment calls on Akshaya Tritiya.

Gold has been a victim of sustained global attack as central banks are trying to boost economic activity. Gold prices have plunged at a pace faster than most gold bugs ever expected.

In the past few months, it has fallen around 20 per cent but has recovered on retail buyers rushing to bottom-fish.

After flirting with Rs 32 ,000/ 10g odd levels, prices recently touched Rs 25,270/10g at MCX. “The correction in the long term uptrend has come on the back of encouraging signs of improvement in the US and Chinese economies which have sparked the interest of investors towards riskier asset classes in the expectations of higher yielding returns and have eroded the safe haven appeal of the yellow metal, at least for a while,” a May report by Religare Research says.

While the fall has brought in some buyers pushing up prices, gold bears view this as a false bounce and predict a long term downturn for the metal. “As the risk appetite increases and economic activity picks up, gold prices are likely to drop further. Let there be another $200 drop in prices, then let us see what happens to demand. I am bearish on gold,” Manish Sonthalia, vice-president and fund manager, Motilal Oswal Asset Management, said.

INSULATING GYRATING GOLD

• Akshaya Tritiya considered auspicious for buying gold
• But, choppy prices and bearish outlook have scared gold investors
• Managers offer quant-based gold schemes that limit downside
• The schemes accept cash/Gold ETF units for investment
• Invest in gold when quant indicators show upside
• Move to liquid instruments when indicators turn bearish