Is this the right time to buy Gold

On the Auspicious day of Akshaya Trithiya, there was increased demand of Gold as people wanted to buy jewellery and coins to accumulate Gold.  But is this the right time to invest in Gold.  Let us understand few things.

a.  In spite of people thronging the shops to own the yellow metal, the price of gold was around 1% lower on the day. This is different from the earlier trends, when the price was higher on the akshaya trithiya day.  This indicates that the bearish trend in Gold has set in.

b.  Government has brought in regulations that no financial institution especially banks, should give loan on gold coins more than 50 gm to any individual.  Therefore, your underlying assumption that the coins can be pledged in terms of need to create the liquidity you wanted, turns more difficult and may not fulfill your cash needs.

c. US is removing the stimulus it had offered to the economy. Which means the markets will have to stabilise on their own. With the markets improving, the gold prices are set to fall. Please note that the last five years saw an appreciable gold run, thanks to the stimulus offered by the government, which made people flock for gold assets for the fear of depreciating dollar, instead of equity as an asset class.

d. In the last 18 years, ( in 1994, one gm of gold in India was 500 and now it is 2500 per gm) the appreciation of gold is around 9.75% per annum on a cumulative basis. This is far lower than the FD interests which were above 10% in the last 18 years.

e. When it is giving a moderate return, why invest in this asset class when there are other classes which can yield better returns.

g. More importantly, there is no chain snatching and hence injury, mental agony, running behind the police

h. No lockers required, no fee on lockers which have increase over 100% in the last 5 years

i. No insurance required for gold ornaments and coin

Why lose peace over a piece of Gold. Relax and rejoice

For details  do contact me

varadharajan

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2 thoughts on “Is this the right time to buy Gold

    1. Thank you for writing. One needs to be clear, whether it is as an investment vehicle or as jewellery.
      If it is jewellery, and you can afford it then buy it and enjoy.
      Dont borrow and buy Gold.

      If it is for an investment, you can allocate 10-20% of your investment in Gold.
      You can also read my latest blog.

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