Gold demand for jewelry may have slowed down in India. But the investment demand is very much alive and kicking. As per The Economic Times, India's gold collection under exchange traded funds is up a whopping 76% in June from a year ago. This, even as the metal hit its all time high. Indeed, no other asset has captured as much public imagination as the yellow metal in recent times. And why not. Gold is having a fantastic run as it has increased in price every year for the last 10 years. Moreover, if things go as per plan, it might easily add the 11th year to its kitty.
But the question that begs itself is, 'Will gold continue to go higher, especially in light of the fact that it recently crossed its all time high?' Our answer is indeed in the affirmative. We believe Gold will continue to go higher for quite some time to come. Our belief stems from the rather dilapidated state of the world's fiat money system. This system has now become a victim of its own success. After tackling a few crises successfully in the past, Governments had come to believe that they have developed a panacea for all of the world's economic problems. That was not to be. Whenever a crisis occurred, all that they managed to do was postpone the problem. Eventually it became so big that it has brought the global economy on the brink of a collapse.
Amidst such a gloomy scenario, gold is the only asset that stands tall. Its supply cannot be increased indefinitely and hence, is the best protection against a runaway inflation that we believe will engulf the world sooner or later. Moreover, the yellow metal has yet to hit its all time highs on an inflation adjusted basis. All of this leads us to believe that the Gold is in the initial stages of its long bull run. And it will pay handsomely to have a small percentage of your net worth invested in the yellow metal. But please bear in mind that you should not go overboard with it.
A new committee to oversee regulators miffs RBI
The RBI's discreet nature in tackling regulatory issues has been complimented time and again. But this time the central bank governor himself has been outspoken in his dissatisfaction with the government. Readers may recall that the government recently proposed a committee to oversee regulators. This was after the fallout between the insurance and mutual fund regulators over governing ULIPs.
The RBI's perceived autonomy was exposed to risk if the proposed law was to be passed. And that is something the central bank would least appreciate. In fact, the RBI's proposals have been ignored quite a few times by the government. These include withdrawing subsidies and imposing tax on capital inflows. But this time the governor seems to be in no mood to be a mute spectator.