As prices fall, is it still wise to buy the yellow metal?
Ketan
Tanna
| TNN
Gold in New York fell to the lowest in eight weeks on Friday as the dollar gained. Gold prices generally move up when the dollar goes down and vice versa. But with the dollar now firming up, the appeal of gold as a hedge against the US currency has reduced.
What does all of this mean for the average Indian buyer? Is it time to invest or stay away? Demand for gold may slow down with the end of the wedding season this month, but “buy” seems to be the recommendation of the bullion experts. Harish Kewalramani, director, Bombay Bullion Association, says if someone has plans to buy gold, this is the right time. “Gold prices are at an all-time low and is hovering around Rs 8,850 per 10 gram. But I anticipate a correction and that means the price of gold is likely to move upwards. Also keep in mind that the US government will soon be in an election mode and therefore the dollar’s value is not likely to go down any further as a strong dollar will make a good appeal to the voter”, says Kewalramani.
The average price of gold in India in 2006 was around Rs 8,960 per 10 gram. The average price per 10 gram of gold between January-March this year was Rs 9,200 and in April 2007 it dropped below Rs 9,000. On Friday, gold was available at Rs 8,850 per 10 gram. In the next few days if the price of gold internationally dips below $650, the price in India will also drop further. However, experts estimate that there is a possibility of gold prices going up to about $700 per ounce of gold. Gold hit a 26-year high of $730 just over a year ago. “Remember that gold has never been this cheap in the last year or so. In terms of risk, liquidity and, to an extent, even returns, gold is a safe investment”, says Keyur Shah, associate director, World Gold Council.
So should one invest in gold jewellery, gold coins or buy exchange traded mutual funds? According to Shah, exchange-traded mutual funds are the best bet. There are local jewelers, who also sell gold coins and do not have an added margin of more than 3-4 %, unlike some banks that import gold bars from abroad and where the added margin could be as high as 10 % or more.
