The yellow metal continues its downward slide as of now as other markets are performing really well and investors are giving more weightage to other riskier assets like equities. But despite a negative trend, a well-known expert feels that gold is still an effective way to preserve capital. One can choose to invest in gold somewhere near Rs 25,000 to Rs 25,500 per 10 gm.
In an interview with Ajeet Kumar of Zee Media Corp, Rajiv Kapoor, Head Commodities, Trustline shares his views on gold price trend, outlook and investment.
What are your expectations from the upcoming Union Budget 2014?
We are expecting that the NDA government might relax import duty to the tune of 2-3 percent and it will definitely make gold cheaper. See, Indian jewellers lobby is also expecting relaxation in import rules of 80-20. If it happens, then spot premium is likely to be lowered by Rs 800-1000 on 10 gm.
Is the current downward trend a long-term phenomenon?
You are right. The yellow metal market is in the long-term downward slide as other markets are performing really well and investors are giving importance to other riskier assets like equities. Formation of the NDA government under leadership of Narendra Modi has given lot of confidence amongst all class of investors including FIIs & DIIs. This has also provided a lot of strength to the Indian Rupee, which is also negative for bullions.
What is your outlook for gold price in the near to medium term? (both domestic as well international)
I believe gold might trade in a range of roughly between Rs 25,000-Rs 28,500 as a lot of factors apart from Indian political and economic condition, mainly international factors, have huge influence on its price. The developments in US, China, European economy and other geo-political situations will also play a key role.
Do you believe gold is still an effective way to preserve capital?
Certainly. Gold will always be an effective way to preserve capital. Whenever there is triumph and over-confidence all around the world, one should always adopt a strategy to move some part of their investments into gold.
Can you give some long-term reasons why it’s still a good idea to invest in gold?
That’s right. Gold does not have any yield such as dividend or interest but it always provides you protection during natural, political or financial crisis, which could happen any time. So, it is a sort of insurance to protect some part of capital for unknown danger or crisis. As we have already seen that gold was the best investment asset class after 2008 financial crisis upto late 2012. It gave mind boggling returns of 400 percent during that period.
In your view, what are the three biggest downside risks to gold right now?
Few biggest downside risks are:
- Appreciation in Indian Rupee against dollar.
-Stability and growth in world`s biggest economies like US & China.
-Bottoming out of interest rates in US & Europe as interest rate are near to zero there.
What are the key upside triggers to gold right now?
Biggest upside triggers would be:
-Sudden eruption of geo-political crisis and political instability in middle east.
-Slowdown in the US, European and Chinese economies.
Is it the right time to invest in gold?
One can choose to invest in gold somewhere near Rs 25,000 to Rs 25,500 per 10 gm.
What`s the best way to invest in gold now? physical buying/gold savings fund/ ETFs/ futures/ others?
Certainly, best way to invest in gold is ETFs, gold coins and jewellery.