Before I start I have to admit that Gold in
particular is the most liquid instrument for investment. You can easily sell
and get money even at midnight hours. And I respect such status of gold. We
Indians love gold, and it holds the most basic form of investment which is even
used by a lay man.
Gold prices have been falling for the past
two years and the slide has gained momentum in past 5-6 months. As an investor
I often think about the fact that should I invest in gold?? Mind you I have not
invested in gold until now. What keeps attracting me toward the yellow metal is
the fact that it becomes safest in most turbulent times.
Consider this example; Gold was sliding to Rs.
24000 a fortnight ago, and it was continuously going down, suddenly we started
hearing about the Chinese devaluation of currency and stagnation in Chinese
growth engine. The news was enough to bring a tsunami of selloff in global
markets; equities were touching new lows every other day, heavy panic selling
happened (I invested my monthly sip in equities at this point only).
The
only warrior standing and shining amidst the blood bath was GOLD. It shot up
from 24000 to 27000 in no time, a return of 12.5% in just 15 days… wow that was
fantastic. Moreover gold has a tendency to shoot up in turbulent times, because
not just people but nations too consider it a safe bet.
Gold’s economic cost, the cost incurred in
producing gold is 20740rupees/10 gm (source business insider).add import duty of 10 % .so it will not
go beyond this point and even if it does than it won’t stay there for long
because nations will stop mining gold till demand meets supply and when this
happens the prices of gold will be higher than its economic cost.
There will always be some negatives in
global economy thus gold won’t fall beyond a certain point which I believe is
Rs.23480.
Considering the above mentioned facts and
logic I am planning to invest in gold, a paltry 5% of my monthly SIP. This will
also be my first investment in overall mutual fund industry. There’s a bit of
downside risk, but with great risk comes great profit.
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