Should you buy gold now?
Posted on: 02/Apr/2019 5:43:40 PM
There has been constant decline in the price of gold in the past few months. On 1st February, gold was sold at Rs 33,262 for each 10 grams of gold which is now Rs 31,854 per 10 grams as on 28th March. This accounts to a decline of 4 percent. On the other hand, considering the international price, it remains stable at just a decline of 1 percent. So, the decline in domestic gold rate may entice you to buy the metal, but before you decide to buy, you need to check out the reasons for decline and take a wise choice:
Rupee vs gold
The Indian market for gold is mainly based out of gold imports. So, it means India pays in dollars for procuring gold. Hence, as INR gets weak against US Dollar, there is increase in gold rate and the vice versa happens too.
In the Indian market, there is not much change in terms of demand for gold. Appreciation of rupee is the key reason for difference in price, say experts. In the recent weeks, with more inflow of funds, there is substantial appreciation of rupee. Also, there is constant stability of international gold rate.
In September to October 2018, there was substantial depreciation of INR and came down to Rs 74.38 against USD. So, simultaneously, there was increase in gold rate which saw its peak unlike past 6 years. Later on 28th March, INR got appreciated against USD and was at Rs 69.03. So with 3.85 percent appreciation of gold, the rates have come down by the range 4.23 percent since 4th February.
There is not going to be any further strengthening of rupee in the near future, and hence gold rates are set to remain more or less the same. In the following 6 months, it is likely that gold will be available at the range Rs 33,000 to Rs 33,500. So, there cannot be any price difference to look forward to in the following months.
Is it advisable to buy the metal now?
According to what the financial advisors have to say, there is no need to depend on the existing gold rate. When there is a price fall in gold, you may rebalance with other kinds of assets such as equity and buy more of it.
In asset allocation, gold remains in its very own position and it is logical too. Considering investors, you can buy gold according to your level of asset allocation. Investors are advised to get gold as regular buy than to make huge investments on the same.
It is ideal that you buy gold as sovereign gold bonds from the hands of Reserve Bank of India. With that, you will be able to accumulate gold without buying it physical form. For this, you also get 2.5 percent as annual rate of interest. There is also gold exchange traded fund and digital gold which includes delaying physical possession and hence reduced risk without any fear of theft.
