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But that was then.
With gold prices now trading in the Rs 15,000 plus range for much of the past few weeks, Indian investors may be ready to change their views.
A quick conversation with a jeweller, visits to Tanishq shops, and a few phone calls seemed to suggest that Indians are now ready to jump back into gold.
While the traditional Diwali buying season is one reason, the refusal of gold to fall below the Rs 15,000 level maybe another.
"The price expectation is now Rs. 18,000", said a jeweller, "but I don't know whether it will get there. What do you think?"
Our view on gold has not changed - you should own it.
Well, before we move on to why we think what we think, let's see what others are thinking. And doing.
A global concern?
The Chinese are buying gold.
Newspaper reports suggest that the government is encouraging every Chinese to buy some gold.
This could suggest one of two things:
On September 18th, the IMF announced the sale of 403.3 tonnes of gold worth USD 13 billion "to be conducted under modalities that safeguard against disruption of the global market". This is not "news" as such but a follow-through of the decisions at the G-20 meeting in London in April 2009 where China, India, and Russia had agreed to buy gold.
But note: the buyers are all developing countries with a tradition of a belief in gold and other non-paper currencies.
And then we come to the individual retail investors, globally. Coins are still in short supply, though not as acute as in October 2008, just after the Lehman bankruptcy.
The ETFs have seen some decline in gold tonnage held by them these past few weeks. It is possible that some hedge funds may have sold their holdings.
Barrick, the largest gold mining company in the world has taken the unusual step of cancelling obligations that it had to sell approximately amounting to 304 tonnes (9.5 million ounces) of physical gold to the market at USD 410 per ounce. By cancelling these obligations, Barrick is incurring a loss of USD 590 (the current price of gold, USD 1,000 minus the price at which it agreed to sell, USD 410) per tonne. Multiply this by the 304 tonnes contract size and it is a loss of USD 5.6 billion that Barrick will show on its books.
Now why would Barrick wish to show a loss of USD 5.6 billion on its books?
Barrick is doing this because it probably believes that the price of gold is increasing.
A simple calculation suggests that if Barrick was willing to lose USD 590 per ounce of gold, then it should be hoping to make that up in the future - if not more.
Therefore, one can infer, that Barrick's estimation of gold's future selling price will be USD 1,000 (current price) + USD 590 = USD 1,590 per ounce, at the minimum.
This would translate to Rs 24,900 per 10 grammes if the fx rate of the Indian Rupee remained at USD 1 = INR 48.
Now we are not suggesting that Barrick is correct and that gold will reach the USD 1,590 per ounce price. Remember, the world's largets gold company got it "wrong" when it agreed to sell gold at USD 410 in the forward market. When Barrick made that contract, they obviously thought that gold would not be selling much above that price of USD 410.
Now our opinion...
Well, different people obviously have different opinions.
That is what makes a market, as they say.
Our opinion has not changed: you should have 10% to 15% of your money in gold. You don't need to trade it every month or year.
Just keep it.
The way you would invest in the Quantum Long Term Equity Fund - for a 10 to
20 year investment time horizon.
And if you don't have any gold at all - don't panic and buy your entire 15% exposure immediately.
No, buy 1% every month for the next 15 months.
Read the Offer Document and Fact Sheet of Quantum Gold ETF and then call your broker and place the order; once a month; every month.
It will take you 30 seconds to make that phone call.
Or use your internet e-broking account.
Whether the price of gold is Rs. 16,000 per ten grammes; or Rs 12,000; or Rs 20,000.
If you have a 10 to 20 year time horizon, buying steadily over months will ensure that you averaged your buy-in price and then hold on to it for as long as the IMF has gold to sell.
And when the IMF runs out of gold and wishes to start buying some, you can sell your gold to them - and other central bankers - at some pretty good prices J
Suggested allocation in Quantum Mutual Funds (after keeping safe money aside)