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Gold ebbs, but sizzle to stay

Gold prices in India are expected to move up in 2013 despite a recent slide, say experts. Sachin Kumar reports. The 24-carat question

business Updated: Dec 25, 2012 02:53 IST
Sachin Kumar

Gold prices in India are expected to move up in 2013 despite a recent slide, say experts.

Prices of the yellow metal have fallen around 6% so far from its all-time high of Rs.32,975 on November 27. It closed marginally lower on Monday at Rs.30,730 per 10 grams against Friday's close of Rs.30,760.

With Europe still in recession and the US struggling with fiscal cliff issues, gold is likely to retain its “safe haven” tag compared to equities, as investors use the yellow metal to hedge against inflation.

“Major economies around the world are still struggling for growth and various issues including fiscal cliff are still unresolved. Gold’s safe heaven appeal will continue to attract investors in 2013,” said Hitesh Jain, gold analyst, India Infoline.

“Moreover, the US Federal Reserve’s decision to keep interest rates low till 2015 augurs well for gold. The recent fall in gold prices should be seen as an opportunity to invest in the long term in the yellow metal.”

“There is a lot of money flowing around the world which would push inflation up,” said Naveen Mathur, gold analyst, Angel Broking. “Gold prices are expected to move up going forward as investors use yellow metal as a hedge against inflation.”

However, it should not mean that an investor should put all her eggs in one basket. Financial planners suggest that investment in gold should not be more than 10% of the total investment portfolio.

"If your investment in gold is less than 10% of total investments, then you should go for gold," said Vishal Dhawan, founder, Plan Ahead Wealth Advisors.

Indians bought 607.6 tonnes of gold in the first nine months of 2012 according to the World Gold Council. India's gold import jumped nearly 50% to $60 billion in 2011-12 against the last fiscal year, pushing the current account deficit to a record $78.2 billion or 4.2% of GDP (gross domestic product).