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Stay invested in gold for long-term returns

business Updated: Jun 22, 2012 00:24 IST
Sachin Dave

Do you think gold above Rs 30,000 per 10 grams is currently the best investment bet? Well, think again. With the crisis in the euro zone and the US showing no signs of easing, analysts are advising retail investors to take the cautious route, at least in the short term.

“There is a concern that gold prices will fall sharply up to Rs 4,000 from the current levels due to the euro zone crisis combined with weak growth in the US,” said Atul Shah, head, commodities, Emkey. “Retail investors are advised to stay away from buying bullion at this time.”

Global gold prices slipped for the third straight day on Thursday after the US Federal Reserve stopped short of launching another round of quantitative easing to boost the slowing economy. The fall in the gold prices in India was, however, offset by the rupee’s depreciation.

However, analysts said the yellow metal can be a good investment option in the long term. “Gold will remain a safe investment in the long run as investors will run for safe heavens,” said Hitesh Jain, commodity analyst with IIFL. Also with the festival season approacing in the second half of the year, prices may touch up to Rs 32,000 per 10 grams, he added.

“In the short run prices could fall up to Rs 29,500 per 10 grams," said Jain.

“However, gold is always a good investment in the long run especially for retail investors, considering the slowdown in the Indian economy and absence of any other avenues for good returns,” he added.

Meanwhile, spot traders on Thursday complained that there was almost no sales happening as customers were waiting for a fall in prices. Gold prices were down by about 0.7% on Thursday at Rs 30,085 per 10 grams.

The metal fell below $1,600 an ounce in Europe following comments from the US Fed.