Business
Gold as an investment option
By Ramnath Subbu
A young girl tries an old styled necklace during a popular jewellery exhibition in Kolkata.
MUMBAI
FEB. 9.
Gold now is living up to its reputation of being among the most liquid of all assets. Amidst shaky equity markets and weak currencies, gold has come to the forefront as an investment option. This was evident last week when gold prices zoomed on Friday last and touched Rs. 4,960 per 10 gm and 10 tola bars were quoted at five year high of Rs. 58,400.
On Thursday, it was quoted at Rs. 4,900 (10 gm), up 10 per cent from Wednesday and on Friday, it scaled the five year high. The all time high was touched on February 6, 1996 when it was quoted at Rs. 5,713 (10 gm).
Internationally too, the rally in 10 days has pushed gold prices to around $304 an ounce and this is the first time since September 11 that it has crossed the $290 mark. In effect, over a 10-day period, gold price has gained around $35 or almost 8 per cent. Historically, the dollar moves in inverse proportion to gold prices — a weak dollar leads to rise in gold prices and vice versa. The average person in Japan will find almost half of his/her saving not guaranteed after April 1, 2002 owing to banking problems. The nervousness among Japanese has also prompted the gold price rise with most investors choosing to buy gold. Other contributory factors include the Enron saga, the Irish Bank fraud, the impending Chinese New Year and the consolidation effects of big mining companies. Also, there was news earlier last week of AngloGold planning to trim its gold stocks from 16 million ounces to 10 million ounces over a year. "Come March when the marriage season picks up, people will start buying gold. The market is now bullish and further gains are expected in the coming weeks," said Dinesh Chandra Parikh, bullion analyst. The demand in the first three months of the year will be boosted by a substantial number of marriages and other festivals.In India, imports have almost completely stopped and may take place only to a restricted level. "Supply is being satisfied by old gold ornaments resale. The rocky ride in the metal prices has prompted Indian buyers to go in for trading scrap metal or old gold ornaments. Investors who had hedged at lower prices are now taking advantage and booking profits — after all, it is a chance in many years".
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