Currently, gold rates are high because of the ongoing war in Iraq. If geo-political tension escalates in Middle East, the gold rates are expected to go up further.
In an interview with Vrinda Sharma of Zee Media Corp, SK Jain, Vice President of All India Sarafa Association shares his views on gold price trend, outlook and investment.
What are your expectations from the upcoming Budget?
Import duty on gold is at 10 percent now. I think the NDA government will reduce some duty on gold in the Budget 2014-15.
If government eases import norms in the Budget, how will it impact the gold prices?
If government cuts import duty, gold prices will come down.
We are currently witnessing a downtrend market. Will current downtrend sustain?
Actually, this all will depend upon the Budget outcome. Currently, bullion market is overpriced. I think after the Budget, prices may see a maximum change from somewhere between Rs 500 to Rs 600, but in the medium to long term, it will remain the same.
What range do you expect gold to trade by Diwali this year?
Generally, domestic prices move in tandem with the international market and, in both overseas and local markets, gold price will remain same till Diwali. Currently, rates are high because of the ongoing geo-political tension in the Middle East. If it continues, rates will rise further.
Do you believe gold is still an effective way to preserve the capital?
Gold will always remain a good investment option as whenever you need money you can easily sell it off. Suppose you have bought gold of Rs 1 lakh and you require Rs 10,000, you can sell jewellery worth of the same amount. Buyers should not panic if prices go down for a while.
Can you explain some of the long-term reasons why it is still a good idea to invest in gold?
Gold is always a good investment option and people should buy it in instalments because prices of yellow metal remain volatile.
In your view, what are the three biggest downside risks to gold right now?
I think there is no risk for gold at all. Whoever has ever invested in gold always got some profit. Though gold prices have fallen in the recent times but will go up again in the days to come.
Is it the right time to invest in gold?
Yes, definitely it is a good time for investment. As I have told you earlier if someone wants to invest Rs 1 lakh in gold, he should buy gold worth Rs 20,000 now and he can continue buying the yellow metal in instalments whenever prices take a dip, so an average will be maintained. I think gold rate will not fall more.
What`s the best way to invest in gold now? (physical buying/gold saving funds/ETFs/others)
Physical buying is best, as what they are paying, they are getting the same and whenever you require money you can easily sell the gold.