Zee Media Bureau
Gold prices dropped to four-year low levels, dropping below Rs 25,000 per 10 gram mark in Mumbai, amid a global rout in the rates of precious metal.
At the current level what should the aam admi do? Should he invest in gold now or should he wait further? Should he invest in gold jewellery or gold coin or ETF? Many such questions are cropping up in the mind of the common man. Let’s have a look at the options and the impact.
For Sellers
If you have invested in gold (ETF, coin or jewellery, gold futures) there is no need to panic. Unless there is an emergency, it is not advisable to sell gold at this point. The fall in the price of gold is merely a price correction. Although a further drop in prices cannot be ruled out, the sellers can be sure that gold will hold good returns in the long term. The price correction may stay for six months or a year after which it will again move northward. So, the seller can sit and wait for the right time and opportunity.
For Buyers
This is certainly the best time for traditional buyers (for wedding purpose and gift purpose). Though it is advisable to wait a little more and watch the price of gold (which is expected to dip further), nonetheless instant investment won’t be disappointing either. You can opt for gold at the current level. Traditional buyers can invest 30-40 percent of their total budget in buying gold at the current level and release an additional chunk after further price correction. However, serious investors and first time investors can err on the side of caution. In the coming one or two years, gold will not witness any major rally. So, investment in other financial instruments like equity, mutual funds and debt can be thought of as an alternative. Conversely, it is advisable to have one tenth of gold in your total portfolio both for the first time investors as well as the seasoned ones.
Non-buyers/sellers
The correction in price of gold will also affect the third category of persons who neither intend to buy or sell. Correction in the price of gold will indeed reduce the burden on current account deficit which has been a major concern for the government. A lower current account deficit will help the government to go forward with its welfare schemes, infrastructure development and flagship programmes aimed at benefitting the common man.
