When Should You Invest In Gold ?Now!!!

The rally in the equity markets from August/September 2013 has seen the benchmark indices, the S&P Sensex and the CNX Nifty, move up by 35 per cent till now, with investor preference shifting to riskier assets such as equities.

In contrast, gold and silver, considered safe haven bets in uncertain times, lost 8.8 per cent and 20.4 per cent, respectively, during this period. Consumer demand (in monetary terms) for jewellery, gold bars and coins dipped 41 per cent in the first quarter of calendar year 2014 to $7,911 million. In physical terms, it was 26 per cent lower, at 190.3 tonnes.

All this, in effect, also reflects the investor's preferred investment choice at a time when the country was gearing up to vote on a new government. "In addition to the ongoing restrictions to gold imports, India's consumers faced further obstacles as a result of the elections. These created an atmosphere of uncertainty, particularly on the import curbs and whether these might be lifted in the second half of the year, which left many reluctant to buy until a clear post-election picture emerged," says a World Gold Council report.

Adding: "Further, restrictions were imposed on the free movement of cash and other assets, such as gold, for the duration of the election. While these were intended to prevent electoral corruption, they also had the effect of dampening genuine cash purchases of gold. This had a negative impact on demand in the closing weeks of the quarter, which continued into Q2 (the April-June quarter)."

Says C P Krishnan, wholetime director, Geojit Comtrade: "After hiking the duties, investment-based demand for the commodity became unattractive. Volatile domestic currency and restrictions on cash movements during the general election period prompted buyers to stay away from the bullion market. Also, a shift towards other asset classes like equities, performing well for the past few months, adversely affected demand for the yellow metal."