Gold Prices are falling – What should be your strategy now?
One of the safe and best investment options is, investing in Gold. Gold prices are falling now in India, then what should be your strategy now? Should you invest now or wait for some more time for correction?
Investment in Gold
Thought there are several investment options, one of the good investment options which have given excellent returns of 20% to 22% in long run is investment in gold. Such yellow metal has always been in positive trend in the long term. Gone are the days where people used to invest in physical gold. Thought there are several ways in investing in gold, with paper gold coming into picture (Gold ETF’s and Gold mutual funds), investment into gold has increased dramatically.
Why gold prices are falling now in India?
It is difficult to say the exact reasons, but below are some of the insights to that.
- Indians have reduced the pace of investing in gold. Investment in ETF’s was at Rs 4,046 Crores in 2011 Vs Rs 1,826 Crores in 2012. Investment in paper gold in 2011 was very high.
- World gold council says that demand of Gold in 2012 in India has fell by 312 tonnes i.e. fell by 15% year on year.
- Import duty has gradually increased by 6% in 2012.
- The returns on gold has given an approx of 7.5% return in 2012
- Uncertain global markets affecting the gold prices.
- Further increase in import duty indicated by Govt. last month is making the gold not attractive. With supply remaining same, demand of gold has fallen, which is pushing the gold prices downside.
What should be your strategy on investing in gold now?
We all would be happy and start buying more gold if gold prices are increasing. We are not happy if gold prices falls. We live in this mindset. What would have happened if gold prices moved from Rs 3,100 per gram to Rs 3,500 per gram? We would have regretted that why we could not buy when gold rates were falling. Whether you should invest in gold or not depends about your investment objective:
- Accumulating gold: If you have a daughter and think of buying physical gold or paper gold which would be most useful during her marriage, what would you do now? If prices are falling, you would buy more. Your intention is not buy at low and sell at high here right? You want to accumulate gold as early as possible with less cost.
- Investment in gold: If your objective is purely from investment perspective, what you should do now? In long term, investment in gold has given an annualized return of 20% to 22%. Are you just looking for short term price fluctuations? No. Hence a speculative investor would prefer to invest when prices are falling. Your intention is to buy at low and sell at high here. You can choose approriate allocation of funds for investing in gold.
What should be your strategy if gold prices take further dip?
Refer point no.1 and 2 above 🙂
Conclusion: Investments in gold has always been giving good returns. Encash every such opportunity when gold prices are dipping and keep investing in them. My advice is not that you should invest huge amounts during such fall in gold prices, but invest additional amounts during such dips to gain in long run. My wife asked the same question to me few minutes back , “what is your strategy now ?”. I am logging in to ICICI Direct to make a request to buy Gold ETF’s 🙂
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Gold Prices are falling – What should be your strategy now