`ETFs is the best way to invest in gold`

By Reema Sharma | Updated: Nov 01, 2013, 10:18 AM IST

Despite the price rise, the festive demand for jewellery on Dhanteras remains buoyant. Since Dhanteras is considered auspicious for buying the yellow metal, people should not shy away from customary buying. However, experts have cautioned that buying should not be for the sake of investment.

In an interview with Reema Sharma of Zeebiz.com, Rajiv Kapoor, Head Commodities, Trustline shares his views on gold price volatility and investment in the yellow metal.

This Dhanteras what should traditional gold buyers look for?

Traditional buyers should buy as usual because ritual/traditional sentiments are attached. Gold purchase is considered really very good on the auspicious day of Dhanteras. But buying should only be for customarily purpose not for investment purpose.

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Has the gold buyer become immune to volatility in gold prices?

Price volatility is more in futures market i.e. MCX, not in the spot market. If you check the spot prices, gold was roughly trading around Rs 30,300 around 15 days back and today it is around Rs 31,100. Thus it is moving in a range of 2-3% broadly.

Is physical buying of gold a good option?

I do not think physical buying is good option as premium in spot market is quite high now a days because of on-going festival season as well as upcoming marriage season in India. Normally demand is very high during these days. Yesterday, RBI Governor Mr. Raghuram Rajan also indicated that current import restriction shall be lifted once CAD is come down as per government expectation, so these spot premiums will go away. So, ETFs could be the best way to invest in gold.

What will be the impact of high gold premiums? Do you think there will be further hike in the premium?

Premium indicates that there is a demand and supply mismatch. Either demand is too high or supply is too low. Currently, in India it is a situation of supply constraints due to imposition of import restrictions. Yes, premiums might hike further if availability of gold remains low.

What price do you expect for gold by next dhanteras?

I think gold prices will swing between Rs 28,000 and Rs 33,000. The price of gold for next dhanteras primarily depends upon international as well as domestic conditions. In the international condition, the U.S. economic developments like tapering down of QE3 (stimulus) and in domestic conditions Indian growth story like CAD or GDP have to be watched. If stimulus is scaled down by U.S. then this will be negative for gold prices. U.S. equity which is currently in Bull run will also keep away the investors from gold. If Indian CAD is brought down substantially or GDP grows more than 5.5%, then it will play a negative role for gold prices and vice-versa.