Saturday, February 28, 2009

Gold will be Gold?

History of gold prices (in rupees):


1930: 180 per 10 gram

1940: 360 per 10 gram 
1950: 1000 per 10 gram 
1960: 1110 per 10 gram 
1970: 1840 per 10 gram 
1975: 5,400 per 10 gram 
2000: 3,000 per 10 gram 
2006: 5,400 per 10 gram 
2009: 15,700 per 10 gram.


Gold surprisingly gave 300% returns from 1970 to 1975 when world suffered worst ever recession after great Depression. Will the history repeat? That is the reason behind current "Mad Gold rush". But if you had invested in the Gold in 1975, your investment would have given negative returns for the next 25 years. 

Remember 2 things: 

1. Gold generally trades in the lower range around March and July. Generally, it is the best time to buy gold and marriage season is the best time to sell Gold. 

2. Below 11,000, Gold is a safe investment but above 15,000- it is only for traders but not for investors. 

Future of Gold: 

When stock markets were in down turn in 2002, Gold was at Rs 5,400 per 10 gram. Don't forget that Gold traded below 9,000 per 10 gram till 2007, means you might have got routine returns from Gold investment. But investors who made investments in gold in mid-2007 are now making 70% returns in just 20 months. But I don't know what will happen to gold investors who bought it at above 15,000 but they remain in losses even after 3 years.

Why? Gold will recede to 11,000 levels once equities make comeback. What happened to crude oil will repeat in case of gold also. Don't forget that Gold is not even an essential commodity. But Gold is a less volatile investment. 


1. Crude oil prices moved to $147 per barrel and Goldman Sachs people gave $200 per barrel target. It is now trading below the fundamental price at $35 per barrel. 

2. Sensex moved to 21,000 and analysts gave 30,000 target. It is now trading at 9,000 levels. 

3. Real Estate prices reached astronomical levels in 2007 but people bought land as if there will be no land available for purchase in future.


4. Gold – 15,700… what next?

No comments:

Post a Comment