Over the last few weeks, investors around the world have been hoarding up on that traditional safe haven investment: gold. In fact, gold bars and coins have, at times, commanded a premium as investors rushed to buy gold in physical format and not just through exchange-traded funds (ETF). The trigger is, of course, the financial distress and uncertainty brought on by the US credit crisis.

“We recommend that investors stay invested in gold. For the beauty of investing in gold is that it preserves wealth against geo-political and financial crisis,” says an analyst from Motilal Oswal Commodities Broker. Adds Keyur Shah, associate director, World Gold Council (WGC) India: “Till the US credit crisis is over, the trend for gold will be very bullish.”

Sanjiv Shah, executive director, Benchmark Asset Management Company, which manages the Gold Benchmark Exchange-Traded Scheme (Gold BeES) also feels that gold will be in hot demand. “There’s so much uncertainty that it may make sense for investors to get into gold. Also, in terms of asset allocation, people should have some gold in their portfolio.” This could range from 10 per cent to 20 per cent. Remember that gold has given high returns over the last year. The five Indian gold ETFs gave a category return of around 37 per cent for the year ended October 2, 2008.

Nevertheless, Somnath Dey, who’s in charge of metals and energy research at Religare Commodities is a little bearish on the metal over a one-month period. He feels gold prices, which were around $840 on October 2, could slip to $780 over the next month “because we’re seeing a multi-asset liquidation with the metals sell-off”. “But I will be wholly bullish over a three-month and one-year period. With the global economy slowing down, money is going to get parked in gold,” he says. The US government’s bailout package for failing financial institutions, feels Dey, will lead to a weakening of the dollar, and consequent strengthening of gold. The two are inversely correlated. In fact, Diwali, feels Dey could provide “a good buying opportunity be it for investment or festive reasons.” He says investors could consider entering at around Rs 12,000-Rs 12,300 levels, and expects a one-year return of around 20 per cent.

At Motilal Oswal too, their analyst believes investors could enter at $810-$820 levels. He expects gold prices to touch $900-$925 within three months. “The idea is not to look at a lot of returns but to preserve your wealth against the uncertainty. Because gold will not go down as sharply as other assets,” he says.

Gold prices have been volatile this year though, moving from the year’s high of $1,011 in March to $853 in May. They climbed back to $986 by mid-July only to slip to $740 by mid-September. Apart from physical gold, Indian investors are investing in gold ETFs too. The Gold BeES’s assets, for instance, rose from around Rs 245 crore in end-August to around Rs 280 crore as on September 30. Trading volumes on the exchange are up too. Clearly then, right now gold is glittering brightly.