Is Gold a viable Investment today

IS GOLD A VIABLE INVESTMENT TODAY???

Most commonly asked question ….

Perhaps no other market in the world has the universal appeal of the gold market. For centuries, gold has been coveted for its unique blend of rarity, beauty, and near indestructibility. Nations have embraced gold as a store of wealth and a medium of international exchange; individuals have sought to possess gold as insurance against the day-to-day uncertainties of paper money.Investors generally buy gold as a hedge or harbour against economic, political, or social fiat currency crises (including investment market declines, burgeoning national debt, currency failure, inflation, war and social unrest)

The crash in gold prices was one of the biggest shockers of 2013. A correction had already begun at the far end of 2012, but prices really crashed in 2013, triggered by fears that the US Federal Reserve would scale down and do away with the economic stimulus. However, Indian investors in gold were cushioned against the crash due to the fall in the rupee. As the dollar became costlier, gold continued to fetch a higher price in India. Besides, the government introduced certain measures that pushed up the domestic price of the metal. Import duty on gold was hiked from 2% to 10%, increasing the landed cost of gold. Quantitative restrictions were also imposed on gold imports, such as the RBI's 20:80 scheme, which mandates that 20% of imports need to be re-exported . As a result of these measures, domestic prices of gold have receded by only 4.3%, compared to the 28% drop in global gold prices during 2013.
This gap in the price of gold has created an opportunity for 'legal smuggling' of the yellow metal. NRIs returning to India after spending more than six months abroad are allowed to carry up to 1 kg of gold. Jewellers are using NRIs as carriers , even offering to pay for their air fare if they bring in gold for them. This gap in the price of gold has created an opportunity for 'legal smuggling' of the yellow metal. NRIs returning to India after spending more than six months abroad are allowed to carry up to 1 kg of gold. Jewellers are using NRIs as carriers , even offering to pay for their air fare if they bring in gold for them.

Gold is no longer the safe haven it used to be. Its price can also come down, shattering a long held belief. The currency dynamics and policy measures can lead to a significant variance in domestic and global prices. Thus Gold ceases to be a viable investment as International gold prices continues to correct itself in 2014. Domestic gold prices have been cushioned from the global crash but this could change in the New Year as the government rolls back some of the harsh measures introduced in 2013. Getting gold from abroad for a jeweller may seem a great way to earn easy money, but there are several glitches in this arrangement. The tax department may want to know where you got the money to buy the gold. Since this involves profit, you would also have to pay tax on the gains.

References:-

www.Bloomberg.com

www.wikipedia.com

economic times

Self understanding