The Hindu Business Line : Invest in gold?

Gold is always considered as a sound investment option. World markets are facing slow growth and the Indian economy is also suffering from double-digit inflation. So this may be the ideal time to include gold in one’s portfolio. Additionally, gold prices have been falling steadily and technical analysis suggests that the prices could soon bottom out. This would result in an increase in demand, which would slowly restore prices. Those with 6-8 month investment horizon could look at cutting back their exposures to the equities market and divert them to gold. Instead of investing in physical gold, investors should explore Gold Exchange Traded Funds (ETFs), which provide protection against theft and are more convenient.

P.H. Karthik, Chennai

India is the largest importer of gold and jewellery and it accounts for most of the demand. The purchasing power of the people has come down drastically due to high inflation and the consumption of gold has declined.

V. Ramjee, e-mail

It is the right time to invest in gold. It has been empirically established that there is inverse relationship between dollar and gold price. With the global economy still reeling under the shock from the sub-prime meltdown, the prospects for gold is bright, as it is considered as a stable asset.

V. Narayanan, Navi Mumbai

Jatinder Pal Singh

Yes, it is the right time to invest in gold as it can prove to be a safe bet during uncertain times. People who invested in stocks have burnt their fingers during the recent fall fuelled by dollar weakness, higher inflation and rising petroleum prices.

The gold market in our country is highly price sensitive. Although one must invest a portion of one’s investment in gold, one should not go overboard. While there are several benefits to investing in gold, there are certain shortcomings also

Gold does not provide regular income like debentures or fixed deposits.

Investment in gold does not provide any tax benefits.

Purity of the metal is always a cause for worry.

There is always some extra cost involved in preserving gold.

If one decides to buy gold through a stock exchange (that is, gold exchange-traded fund), then one has to maintain a demat account.

Jatinder Pal Singh, New Delhi

The price of gold is ultimately driven by supply and demand. As the US dollar strengthens, gold becomes cheaper. If crude becomes cheaper and dollar strengthens there will be more surprises and gold may still decline further. It is difficult to say whether the gold price has hit its lowest. So instead of buying gold at one stretch, it is better to buy in dips.

S. Pachinathan, e-mail

Gold seems to have lost its glitter and the prices have fallen quite drastically. Speculators have started deserting gold to chase better prospects elsewhere. Gold has been a store of value for many years. Price of gold is ultimately driven by supply and demand. Central banks in various countries and the IMF play a crucial role in deciding gold prices, which have declined recently on weak global cues. Selling pressure is on the rise and the prices may fall further due to the concern that dollar may gain further.

From now on gold prices may be at the mercy of the dollar and crude oil. In the long run, if the dollar continues to remain strong then it may be negative for the gold market. In India, the rising gold prices have brought about a near-complete elimination of demand. Very poor purchasing power on account of high inflation has also eroded the demand.

So the best strategy to invest in gold would be to buying in dips.

Dr K.K. Ammannaya, Udupi

The prices of all the commodities have fallen recently owing to the resurgence of dollar. Inflation has affected the buying power of people in India. The gold prices may go up due to the ensuing festival season.

Ashok Jayaram, Bangalore

Investing in gold is an age-old practice. But, of recently, there are several investment choices available for the investors. Investment in gold is a risky option as the capital appreciation may not be substantial. Before investing in gold it is better to explore other options available.

T. R. Anandan, Coimbatore

Gold will never disappoint any investor at any point of time. Though the prices may be unpredictable, it may never bring losses. Given the fact that the stock and real-estate markets are in doldrums, it may be the right time to invest in gold.

K. Nagarajan, Bangalore

Only genuine buyers should buy gold at these levels, while other investors can shift to other less-risky assets. The relentless increase over the last year in gold price has led to demand destruction in India, which is the biggest gold consumer.

Though gold prices have come off by more than 20 per cent from their peak, driven by the sharp decline in crude oil price and rise of dollar against other currencies, the worst is not yet over for gold. Moreover, the hedge funds have also decreased their net-long positions in gold futures. In the short-term, prices may rise marginally due to the upcoming festival season in India.

Anubhav Sharma, Chennai

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