Gold Investment "Should Be 15-20% of Portfolio"

INVESTORS in one of the world's biggest gold markets should make sure they include a sufficient level of Gold Investment in their portfolio, according to the manager of a Goldman Sachs-owned mutual fund.

Sanjiv Shah, executive director of Mumbai-based Benchmark Asset Management – which was bought by Goldman last month – told investors in India Wednesday that today's Gold Price "shouldn't matter", as investors should focus on asset allocation.

"There is no way one can know whether the markets are pricing the asset right, wrong, whatever, because a market is a market," he said in an interview with India's CNBC-TV18. "Our view is very clear...you have to have at least 15-20% gold in your portfolio" 

Shah added that the converse is also true, and investors with more than 15-20% in should reduce their holdings.

"One shouldn't worry about today's prices because at the end of the day, asset allocation matters more than the price today and tomorrow," he said.

India is the world's largest market for physical gold. Figures from the World Gold Council (WGC) estimate that it imported around $38 billion worth of gold in 2010 – 963 tonnes, a rise of 66% on 2009. 

Gold consumption per capita remains low, however. Speaking to finance professionals on a conference call hosted by etf securities Tuesday, Eily Ong, WGC's investment research manager, provided data showing that India's annual gold consumption amounts to less than half a gram per head of population.

Ridham Desai, Mumbai-based managing director at Morgan Stanley Research, said Wednesday that his firm's recent Alphawise survey suggests 2011 will see a move towards Gold Investment demand among Indians.

"Though jewelry accounts for 75-80% of consumer demand in India, the survey suggests that Indians are looking to Buy Gold as an investment rather than for consumption, which in our view is a positive development," he said.