Investment in Gold – Negative Return Expected for Indian Investor


The Indian investors with mind-set of investment in gold for good return in short to long terms are going to get crude shockwaves. The current domestic gold price is maintaining 26500 to 28000 INR range due to continuous fall in Indian Currencies against US $. The fall in Indian Currency negated the negative impact of major fall in International Gold price level. When International Gold price was around $1450 then also Indian domestic gold price was hovering around 28000 INR. The fall of Indian currency from 53 to 60 reflects 12% drop whereas International Gold price fell 20%. Post US FOMC meeting and comment from US fed regarding QE tapering, the cascading impact of it is going to settle down in next few trading session but at the same time, going to positively impact investors’ confidence about potential growth moment, return of higher interest rate regime, under controlled inflation number. Positive monsoon prediction, Expected government action to raise FDI cap in multiple sectors, Policy clarity on Fuel Supply to power companies, Gas pricing and etc may act as catalyst for Indian Currency rebounding back to 54 to 55 levels. The continuous fall of International Gold Price which is expected to fall further, potential Indian Currency rebound will negatively impact Indian Domestic Gold Price. I believe that, one should be surprised if Indian domestic gold price falls to 22000 INR in next 6 month. Any investor buying gold purely on investment purpose should be ready for negative return. In my upcoming post, I will give reason why equity investment is better than Gold given the high inflation and other Economic KPI’s

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