Everyone is aware of the falling rates of gold in India. The gold prices are hovering around Rs. 26,000 per 10 gm, the lowest in over four months. The catalyst for the fall has been the recent easing of some import restrictions by the Reserve Bank of India. Also, traders anticipate a further fall in gold prices if the Narendra Modi government decides to rewind some of the import restrictions imposed by the earlier government. Now, the big question arrives here is that it is beneficial to invest in gold at these uncertain rates? Well, analysts suggest one can invest from a long-term perspective at current price levels but those seeking to invest for the short term can wait till prices correct further.
Let’s have a look why gold rate is falling and you should buy it or not-
Easing of Import Restrictions: Last month RBI removed some curbs on imports of gold. This led to a fall of Rs. 800 in gold prices on May 22, its biggest one-day fall this year. The RBI expanded the number of private agencies that can import the precious metal while also allowing banks to provide gold loans to the sector.
Anticipation of Price Dip: Traders anticipate gold prices to decline on expectations that the government will ease import restrictions. Sachin Kothari, director of BullionIndia said, “There is a feeling in the market that import duty will be reduced from 10 per cent to 4 per cent in the upcoming budget. If that happens and rupee continues to remain strong, gold prices can come down to Rs. 24,000-25,000 per 10 gm.”
No Near-Term Seasonal Demand Pick-up: Generally, gold demand slows down in India when there is no festival or the wedding season round the corner. Mr. Kothari confirms that gold demand to remain soft in June and July 2014. “So will not see much buying unless gold prices drop to Rs. 25,000 per 10 gm level,” he suggested.
Falling Investment Demand: According to World Gold Council, total investment demand during the first quarter (January-March) of 2014 in India was down by 54 per cent at 44.7 tonnes from 98 tonnes in the same quarter last year. In April, gold ETFs saw a pullout of Rs. 146 crore in April, following a pullout of Rs. 149 crore in March.
And with Indian stock markets rising to record highs, interest in gold as an investment asset is likely to remain subdued, analysts say. Gold is often seen as an investment alternative to riskier assets such as stocks. So, invest in gold for long-term prospective!
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