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Gold to touch R 27,000 by Diwali: Analyst

Dailybhaskar.com  

Continuous volatility in the Indian market over the last few years and rising inflation has been the matter of discussion for some time now. And in a volatile market people look for safe options where they can invest their money without worrying about fluctuations plaguing the market.

Global economic concerns and the lack of safety in sovereign debt have also encouraged investors to invest their funds in safe options, primarily gold and silver.

The yellow metal has risen continuously and touched newer highs over the past months. A year ago the price of the yellow metal was $1200 an ounce; today it is above $1600. It has increased in value over the last 12 months by 33%. This compels me to conclude that in a year’s time, conditions are likely to be worse (for currencies) than they are now. Dollar is continuously under pressure and we will see a higher gold price in the coming few months.

The demand for gold is increasing day-by-day in China and India. The current consumption in both the countries is 51 % of the total consumption all over the world, and is expected to increase up to 58 %. The central banks of countries all over the world are also on a buying spree: South Korea's central bank bought 25 tones of gold over the past two months in its first purchase in more than a decade, and it plans to buy more gold soon.

US’s economy rating has been deeply impacted after its debt was downgraded from AAA to AA+ by credit rating agency Standard and Poor’s. Dollar has further weakened since this event, thereby strengthening gold and silver further.

Also, a Chinese rating agency has downgraded the US's credit rating from A plus to A, and this may have an impact on US treasury bonds and it might further weaken demand for dollar, which in turn will fuel rise in price of gold and silver.

I believe investment in gold is a safer as a long term than as a short term bet. If you are thinking of returns in the long term then gold is probably the right option.

We may see the levels of Rs 27,000 in gold by this Diwali due to the rise of demand in yellow metal as a better investment alternative.

Source: Rupa Mehta, Sr Commodity Analyst, Well India

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