Gold is on a delightful slide. You may think it is the best time to buy the yellow metal, but experts say it would be prudent to wait for some more time as the prices will rise and then settle around Rs 23k per 10 grammes. And, it is definitely not the right time to invest in gold bonds. SHAlINI SAKSENA finds out how one must compare a gold investment with other options before putting in the money
The price of 24 carat gold fell from Rs 30,790 (February, 2013) to Rs 26,150 per 10 gm on April 18, 2013. And though, in the last few days, the prices have been steadily on the rise (at Rs 27,150 now), the freefall of almost Rs 3,000 has come as a windfall for buyers.
“There is a wedding in the family later in the year. I was told that gold will touch around Rs 38,000. I didn’t know what to do. Giving gold in a wedding is must. When my husband told me that the price had fallen, I rushed to buy something for the bride-to-be. So, instead of spending around Rs 80,000, I managed to get a nice piece for around Rs 60,000,” Mugdha Sharma, a 45-year-old teacher in the Capital, says.
While Mugdha is not alone and the falling price means a rush at jewellery shops, financial consultants tell you that investing in gold at present is not an entirely viable option. According to Anil Rego, CEO of Right Horizons, an investment advisory and wealth management firm in Bengaluru, one should not jump in and start investing in gold immediately. There may be a further correction in gold prices from here on. “We have been suggesting a systematic investment in gold. This would be a good strategy to use as a systematic investment will reduce/average the purchase cost overall,” Rego says.
Raja, a jeweller in the Capital’s Chandni Chowk area, agrees and tells you that though the prices have fallen and will take more than a couple of months before touching the mark from where they fell, one needs to be cautious. “People have been rushing in to buy ornaments and while it is good from the business point of view — there was a few lull months last year too — one should not be too hasty. Buyers should wait and watch for a few more days. There are chances of another slide. But the prices are not likely to fall below Rs 25,000 per 10 gm for 24 karat,” he tells you.
However, Akshay Tiwari, a Delhi-based investment consultant, says that the price of gold is likely to fall below the Rs 23,000 mark and is unlikely to touch the Rs 32,000 mark any time soon.
“The problem with the Indian investor is that he follows the herd. Some years back, everyone was investing in equity because it was giving good returns and then came gold. Everybody started to invest in bonds because it was considered safe. Today, even gold is not safe, so people are turning to debt. What they don’t understand is that there has to be a balance. Seeing the present trend, I am not bullish about investing in gold. My advice is to wait. Even those who want to buy gold for a wedding should watch the market — buy six months down the line,” Tiwari says.
Buying gold at this stage, he says, is for people who want to buy it as an asset. “A family which knows that after 15 years, it will need 250 gm gold, should buy and keep it. For such a family, it is a necessity so price is no criterion. But this doesn’t mean that people should not take advantage of the slide. If the budget for jewellery is Rs 10 lakh, buy in stages,” Tiwari advises.
Gold as an investment avenue has a wide variety of options — holding it electronically has many advantages over physical holdings, like no wealth tax and no chance of theft. “But even then, a lumpsum investment in gold is not advisable. It is always better to invest systematically in gold mutual fund (through SIPs), Exchange-Traded Funds or e-gold which will take care of the volatility in gold prices. If one intends to buy gold as jewellery for personal use there is no option but to buy physical gold,” Rego says.
Setting the Bar