Gold Prices at 5 Year Low – Should you invest now?

Gold Prices are falling-Should we invest in gold now in 2015Gold Prices at 5 Year Low – Should you invest now?


Gold prices have been in down trend for some time now. In the last 2 weeks, gold prices fallen heavily and touched 5 year low. Selling pressure seen in Gold ETF’s too. Gold investors are in panic now thinking where the gold prices are headed. What are the factors which are contributing to fall in gold prices now? Should you invest in gold now? Should you stay invested in case you are already investing in gold for some time and looking for profits?

Gold Prices at 5 Year Low


Gold prices have been falling sharply this week. Gold gave negative returns in the last couple of years. Gold touched Rs 31,000 per 10 grams few years back and now currently trading at Rs 25,000 per 10 grams. Domestic gold prices are falling based on fall in international gold prices to 5 year low.

Also Read: How much gold should be forming part of your investment portfolio?

Why Gold Prices are falling now on 2015?


While there are several factors, there are only a few main reasons for fall in gold prices now in 2015. These reasons would help you to assess where gold prices are headed in future.

a) US Interest Rate Hike expected in Sep-15


Since 2008, US Federal Reserve has not raised interest rates. Investors in US have been investing in gold as fixed deposit instruments generating low returns. Now analysts are predicting that the US Federal Reserve would hike interest rate in their Sep-15 monetary policy. With this, many investors would sell off gold and invest in fixed return instruments as they generate better returns. We already seeing selling pressure in gold in US where it is pulling down the gold prices.

b) Dollar becoming strong


US Dollar has been strengthening for some time now. With US rate hike, Dollar would further strengthen. This would pull down gold prices in international market.

c) Strong Indian Rupee to Dollar


India is the major importer of gold. Rupee depreciates if we have a Current Account Deficit (CAD). Since our CAD is very low now, it is expected that Indian Rupee may not depreciate. Rupee depreciation would take gold prices up. Strong Indian Rupee now keeps gold prices at same level or pull down the gold prices. Due to the fact that CAD is very low, there are limited chances that gold prices would go up in coming months.

Also Read: Among Gold ETF's and Gold Mutual Funds, which is better investment option?

Should you invest in gold now in 2015?


It is little tricky question. Like I always say, it depends on the investor. Here is what I suggest to various investors:

  • Long term investor: If you are a long term investor or looking to accumulate gold for your daughter marriage or for your spouse, it is the best time to buy physical gold or invest in best Gold ETF’s.
  • Need based investor: If you are need based investor (like daughter marriage is approaching now) or pressure from spouse , you can buy now where gold prices have become cheaper.
  • Short term investor: This is the wrong time to make the investment. You may hold for some more time to review and invest.

I fall under long term investor and I take this as opportunity to buy more gold with less money. My aim is to accumulate as much gold as possible at low rate.

Readers, are you planning to invest in gold now? Are you long term investor, need based or short term investor?

If you like this article, please share this on your Facebook or Twitter. This would be a special gift which you would be giving to our blog.

Suresh
Gold Prices at 5 Year Low – Should you invest now

Suresh KP

11 comments

  1. for long term investor in gold etf, one should understand that they will loose the gold at rate of @1% of previous year end holding for that long term , say 10-15 yrs as the expense ratio of the etf, irrespective of rate of gold as the gold has no/negligible income earning and the expenses of gold etf AMC is to be met by liquifying the underlined gold.

  2. Sir, any good gold ETFs you suggest to start now? The link shows best gold ETFs of 2013, so confirming again with you.

      1. Hi Suresh,
        Hw about GS Gold Bees?
        The SBI Gold EFT is 2399.00 (AS of 28/07 12:38PM) and GS Gold Bees is 2289.20. Why there is much difference between two?

        1. as i understand, though the etf gold unit is said to underlying 1 gm of gold, actually it is not exactly, as year on year, the expense of AMC @1% of gold itself under its management is to be met with. so for older etf, it would be priced less, as it has less gold per unit of etf. so the difference of etf unit price differs.

    1. Malli, they are taxed inline with debt funds. If the holding period is more than three years it is considered as long term if you have sold after that period. Gold Exchange Traded Funds attract short term capital gains as per the income tax slab. On the other hand in the case of long term capital gains on Gold ETFs they attract a 10 per cent tax with indexation or 20 per cent with indexation.

Leave a Reply

Your email address will not be published. Required fields are marked *