There is an old Roman saying that Gold is tried by fire and Brave men by adversity. In the current scenario, it looks like the saying has to be twisted and retold as 'Brave men are tried by Gold'. Those brave men who showed courage in buying when the Yellow metal was at its peak in worth. And now its sliding and how. This graph is steeper than the falling career graph of Vinod Kambli.
Gold was sitting pretty at more than Rs. 31,000 per 10 gms some weeks ago and now its a big struggle to be at even Rs. 26,000. Not bigger than the one faced by the last shirt button of then Adnan Sami. The experts are predicting a free fall and the prices to go downhill from here as well. However there is some light at the end of the tunnel as there might be a support at 22,000. The keen technical analysts would know better. In simple words, Rs. 22,000 is where you would look to stop buying Gold and hope the cascading stops.
Main reason is that global inflation is falling which ends up reducing the value of the yellow metal as a hedging mechanism against rising prices. The so called market pundits who were betting on the wave of inflation hitting every shore of financial activity are scrambling to reverse their bets. Their haste for the exit on their gold positions is greater than the haste of those people for the exits of theaters playing RGV movie.
Another reason for gold losing its strength could be the rising dollar. The green buck has also moved up on the hopes that US economy is emerging from its crises. Similar to how the morale of Mallya goes up once Gayle starts hitting sixes. I hope Mr. Mallya atleast pays him, afterall he wins them half the matches.
Second big reason just might be the speculative selling by investors seeing that there is a trend of falling gold prices. Not just that, simply small pieces of news doing the rounds that Cyprus is planning to sell some of their gold holdings also triggered the speculative selling in anticipation. Somewhere the capseller has thrown his cap and now monkeys all around the world are throwing theirs. Fools all around, or are they ?
Over the years investors considered gold as a safe asset having stable value that is indifferent to inflation. People are known to stock gold even if they dont find any quick inflows which they could have easily got in fixed deposits or scrips. Its like using all your money and buying Glenn Maxwell and using him as a waterboy.
Basically there are two types of investors: One who buy gold for consumption purposes while others for investment purposes. The consumption kind are on seventh heaven and rushing to the nearest Kalyan Jewellers outlet with shopping bags in hand and sparkle in their eyes. No wonder India accounts for 31.5 percent of gold consumption and that too 77% of that in form of jewellery. Power to women !!
Other kind is the pro investment type. They want to extort big bucks from the market and Gold ETF is their weapon of choice. The one time poster boy of Mutual funds look to have lost its sheen with an increased redemption in the last fiscal. And if the pundits are to be believed, owing to falling prices of the yellow metal Gold ETFs would see a severe decline in terms of the popularity.
But even if the investors and the retailers turn their backs on this precious, all need not go berserk as there will be this demi-gold, I mean demi-god who will come to the rescue. Main hoon na !! Like a Boss !!
Main reason is that global inflation is falling which ends up reducing the value of the yellow metal as a hedging mechanism against rising prices. The so called market pundits who were betting on the wave of inflation hitting every shore of financial activity are scrambling to reverse their bets. Their haste for the exit on their gold positions is greater than the haste of those people for the exits of theaters playing RGV movie.
Another reason for gold losing its strength could be the rising dollar. The green buck has also moved up on the hopes that US economy is emerging from its crises. Similar to how the morale of Mallya goes up once Gayle starts hitting sixes. I hope Mr. Mallya atleast pays him, afterall he wins them half the matches.
Second big reason just might be the speculative selling by investors seeing that there is a trend of falling gold prices. Not just that, simply small pieces of news doing the rounds that Cyprus is planning to sell some of their gold holdings also triggered the speculative selling in anticipation. Somewhere the capseller has thrown his cap and now monkeys all around the world are throwing theirs. Fools all around, or are they ?Over the years investors considered gold as a safe asset having stable value that is indifferent to inflation. People are known to stock gold even if they dont find any quick inflows which they could have easily got in fixed deposits or scrips. Its like using all your money and buying Glenn Maxwell and using him as a waterboy.
Basically there are two types of investors: One who buy gold for consumption purposes while others for investment purposes. The consumption kind are on seventh heaven and rushing to the nearest Kalyan Jewellers outlet with shopping bags in hand and sparkle in their eyes. No wonder India accounts for 31.5 percent of gold consumption and that too 77% of that in form of jewellery. Power to women !!
Other kind is the pro investment type. They want to extort big bucks from the market and Gold ETF is their weapon of choice. The one time poster boy of Mutual funds look to have lost its sheen with an increased redemption in the last fiscal. And if the pundits are to be believed, owing to falling prices of the yellow metal Gold ETFs would see a severe decline in terms of the popularity.
But even if the investors and the retailers turn their backs on this precious, all need not go berserk as there will be this demi-gold, I mean demi-god who will come to the rescue. Main hoon na !! Like a Boss !!
Well written. :)
ReplyDeleteI'll add my 2 bits.
The Cyprus news is nonsense. Perfect eg. of how clueless people are and react to inconsequential news. Cyprus has around 15 tonnes of total gold holding, Indian companies have more than that. India recently bought 200 tonnes. If Cyprus selling means prices will fall, by that logic India buying should make prices zoom. Doesn't work that way.
Hard to put an investment value to Gold. With no measure of cash flows, risk or growth it's hard to get an intrinsic value for it. I say that because if you've made lets say a 30% return on gold, your still not going to sell it. Period.
People buy it more for its physicality and as a tangible safety measure (insurance).
Anyhoo, keep writing. Good Stuff. :)
Thanks Benny for the bits.
ReplyDeleteTruly agree with you on the Cyprus bit but saw so many feeds on it that I thought it deserves a mention on the blog.
Also Indian emotional attachment to Gold is very well known.
Keep reading.