After a consistent rise of twelve years the glitter of gold dimmed in the past few weeks. The gold prices in the commodities market slid to two year low of $1,321 an ounce. The speculative trading has led to the biggest one-day loss in dollar terms on Monday 15 April, 2013 and caught everyone by surprise.
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| Gold - the safe haven in times of inflation |
India ranks 11th in the list of countries with largest gold reserves measured in tonnes. According to World Gold Council Indian households have 20,000 tonnes of gold. Indian households have lost over 14 Lakh Crore of their gold value as prices have crashed nearly 22% to 25, 550 from its high of 32,460 in November 2012.
A spectacular bull run in US equities have led investors to look for alternative investment options. Assets in Exchange Traded Funds (ETFs) have seen biggest decline since 2004 as a large number of investors are exiting these gold funds.
International Monetary Fund (IMF) has down-scaled the global economic growth from 3.5% earlier to 3.3% in 2013 nearly same rate as 3.2% of 2012. Investors in the US are heavily investing in US Treasuries - an instrument best related in times when the economy is weak or unstable.
Cyprus Central Bank may have to sell gold reserves to raise 400 million Euros stimulus package and other debt-ridden countries including Italy, Portugal and Spain may follow the suit. The investors stampeded out of Gold-backed ETFs. The spectacular bull run of US Equity Markets, stimulus package of Japan, slowing down of global economy and Federal Reserve hinting at ending of quantitative easing (stimulus/bailout package) are the various reasons investors are fleeing this safe haven.
This fall may be the much-needed correction. But the investors are wary of another dip in the gold prices to $1,200 an ounce due to weak Global demand for gold. If it happens equities will follow. Then it would be real trouble.
A spectacular bull run in US equities have led investors to look for alternative investment options. Assets in Exchange Traded Funds (ETFs) have seen biggest decline since 2004 as a large number of investors are exiting these gold funds.
International Monetary Fund (IMF) has down-scaled the global economic growth from 3.5% earlier to 3.3% in 2013 nearly same rate as 3.2% of 2012. Investors in the US are heavily investing in US Treasuries - an instrument best related in times when the economy is weak or unstable.
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| Traditional Indian Gold Jewelry |
This fall may be the much-needed correction. But the investors are wary of another dip in the gold prices to $1,200 an ounce due to weak Global demand for gold. If it happens equities will follow. Then it would be real trouble.
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