Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Has the gold sell-off ended?
Tue, 28 Jul Pre-Open

Gold is one of the most discussed topics these days. There has been an erratic drop in gold imports during the first quarter of this financial year. Further, the concerns over the anticipated interest rate hike in the US are dragging prices even lower. Prices for the precious metal are trading near five-year lows and fell nearly by 8% in just the last month. Also the Greece debt crisis and a deal between the US and Iran has held back the safe haven demand for gold. With this, sentiments have once again turned bearish. So how did this all happen? Further, is it advantageous for the investors or just one another threat?

Why is gold doomed?

An article in Nzherald states that the price of gold doesn't depend on how much inflation there is, but rather on how much inflation there is relative to interest rates. Further, gold doesn't pay any interest or dividend, but it does cost money to store. This costs you the interest and dividend which could have been earned in some other investment. But this calculation changes when you are paid to borrow money or when you are paying negative interest rate. This happens when inflation is high and the interest rates are lower. The difference between the interest rate and the rate of inflation is the cost that you have saved. This pushes the gold prices higher.

However, if the rate of interest moves higher than the rate of inflation there can be a downturn in the prices of gold. This is because the interest paid above the inflation level is purely a loss to the investor holding gold. So now that the rates are expected to rise, gold prices as you can see are falling. The talks by the US Federal Reserve to raise interest rates have impacted the prices and have dragged the metal to its lowest levels in the last five years.

Can investors benefit from this?

The gold bubble has crashed and brought the prices to their lowest levels witnessed in the last five years. One can look at this downward spiral as a buying opportunity. Also the domestic market is expecting a good Diwali this year, which can push the prices back to their realistic levels. On an optimistic side, investors can expect the prices to surge over a long term period. We would recommend that investors who are searching for a safe haven from the market's recent volatility should hold onto gold as a long term guardian of purchasing power.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary


What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "Has the gold sell-off ended?". Click here!

  

Views on News

Why Gold Hit Lower Circuit (Fast Profits Daily)

Jan 11, 2021

Were you shocked that bullion prices hit lower circuits on Friday on the MCX? Find out why it happened...

My Top 5 Gold ETFs (Fast Profits Daily)

Dec 28, 2020

In this video, I'll tell you my list of the top 5 gold ETFs in India.

Gold ETFs or Gold Bullion? (Fast Profits Daily)

Dec 14, 2020

Should you buy gold in physical form or in electronic form? Find out in this video.

Should You Buy Platinum or Gold or Silver Now? (Fast Profits Daily)

Aug 24, 2020

The precious metals market is booming but are all precious metals a buy? Find out in this video...

Warren Buffett is Bullish on Gold. Are you? (Fast Profits Daily)

Aug 18, 2020

Warren Buffett has bought a stake in a gold mining company. What does this mean for gold bulls?

More Views on News

Most Popular

Is Intraday Trading For You? (Fast Profits Daily)

May 13, 2021

Do you think you have what it takes to be an intraday trader? Find out in this video.

My Secret to Find Breakthrough Stocks (Fast Profits Daily)

May 7, 2021

I've used this trading technique for many years with great success. I'm sharing it with you today.

Are the Stock Markets Deaf to Covid Agony? (Profit Hunter)

May 6, 2021

Why are markets discounting the economic impact of Covid?

The Key to Profit from India's EV Revolution (Profit Hunter)

May 7, 2021

Stocks you must consider investing in before buying your first electric vehicle.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS