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Should You Invest in Gold ??

Last few days has seen a fall to the tune of 3-5 % in bullion . Gold lost close to 700 points in the last few days on the Mcx whereas Silver also has lost considerably falling from 63k levels to 55k in a span of 2 months. The Graph here shows the narrow range in which silver has been trading.

Also in International Markets the price has fallen to 29$ from an all time high of 49 odd levels for silver , a fall of nearly 40% for the Precious metal that is considered a safe Investment till last year. Gold on the other hand has fallen from 1790$ levels to 1585$ as on May 9th.

For years now , Gold has been considered a safe investment for its international value and infallible record of consistent returns. YoY it has provided great returns for as long as i can remember.But there is one catch .. 'as long as i remember' does not mean forever and it also certainly does not mean it will continue to do so.To know more we must have a look at the historical price movements.

                                                         Image Source : Jagoinvestor.com

What i want to convey here is that like everything else Gold also follows the law of demand and supply .There will be periods where it may not move at all or give negative returns as well ( read the chart for the 1960's and 1990's ).In our recent memory we have seen Gold rise consistently and have been thus running after buying gold at every dip.If you are into Gold for quick returns just hope that the current run continues.

Also helping the commodity is the global financial turmoil in which all asset classes are losing prominence when compared to Gold.Also when your currency starts losing value , Gold comes in the ultimate saviour. But if we put aside all the hype and calculate absolute returns on Gold other than in recent intervals then it might not impress much.

Before you Invest in Gold or anything else for that matter you must realise the risk associated with the instrument and not just go by the assumptions that the asset will never fall and will continue generating great returns.Do not buy just because someone asked you to and also because everyone else is buying that.

In India , they say Gold is the most prominent asset one can get hold of and everyone suggests buying gold with every saving we make. Well , may not be a good idea anymore and putting all your eggs in one basket never is.Yes you do need gold in weddings , family functions , Jewellery for women and men  and many other utilities but that's only half the story, the other half forms how much returns your assets and investments generate.

Technically , Gold still remains in up trend and have been resting exactly on the long term uptrend line any movement below which can bring the upside to doubt. At these levels buying for long term in one shot is not advisable.At best if you want do , do get yourself involved in to SIP mode which will take care of the downside possible and will also satiate your want for Gold Investments.

Also Stop living the fact that Gold Prices will never reduce or stagnate for that matter.The great gold rush cannot go on forever and like everything else it also will have to answer the supply side with a downside.

Remeber Crude Oil Prices in 2007-08 ?? and a Year Later ?? :) 



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