After suffering loss in many sessions followed by the Reserve Bank of India's decision to ease import curbs by scrapping 80:20 scheme, gold staged a strong comeback this week by rising Rs 840 to close at Rs 27,040 per ten grams, a level last seen on October 30.
In an interview with Reema Sharma of Zee Media Corp, Vandana Bharti, AVP, Commodity fundamental research, SMC Comtrade Limited, shares her views on investment in gold and its outlook.
Gold prices have been out of favor for the last couple of months. What are the reasons behind massive fall in gold prices?
Recovery in the US economy, strong performance of dollar index, beginning of the process to end quantitative easing, lack of safe haven buying, better return in riskier assets like rise in equities, fall in crude oil prices and many more are the crucial reasons for decrease in gold prices in 2014. Better return in riskier assets resulted in outflow of capital in the bullion counter.
At what range will gold trade in the near term?
Gold may move in the range of 25000-27500 in MCX. It should consolidate at current level. In international market, it may stay above $1150 mark.
Is it wise to invest in gold now for pure investment purpose?
For the investors who are willing to invest for long term, it is a good time to make an investment in gold. At present, it is trading near its cost of production and many miners are opting for production cut. Any rise in physical demand in future may stimulate buying in gold. It may happen in 2- 3 year timeframe.
Which is a better investment option--stock, other financial investment, or gold?
Obviously equity is looking better than any other class. Nevertheless, one should opt for diversification. One should allocate more funds in equity and in currency segment, but also keep at least 4-5 percent of the fund in gold for long-term purpose. It will shield the investment in bad time, if it occurs.
What are the positive sides to buying gold?
Seasonal and wedding demand can increase the physical demand of gold. Furthermore, central banks are still accumulating gold; it’s a positive trigger in the gold market right now. If dollar index rallies and equity market sees a pause, it will stimulate buying in gold across the board.
Will domestic gold witness the kind of rally it saw before General Elections?
First, gold should get stable at current level, then only we can expect some rally. However, fundamentals of gold are not in much favor. If there is any rise in crude prices apart from increase in festive demand, we may see further buying.