Is it Smart or Foolish to Purchase Gold Today?

We wrote an article in March 2012, saying “Why Investing in Gold May Be a Bad Idea Today?” We said gold prices would fall drastically. Our statement was neither fluke nor are we some fortune tellers. We analysed the trends in gold prices and came to that conclusion.

Today, the price of gold has dropped to around Rs 2,500 per gram from Rs 3,100 in November 2012. This is the biggest drop since 1983 (approx. 30 years). With this huge sudden drop, many Indians are planning to purchase gold before it increases again. In fact, they are rushing to jewellery shops and putting their money in gold.

But is it the right time to buy gold? The answer is, “it depends on your situation”.

Is gold price going to increase? Most likely not, and here are some reasons:

• In order to get out of the current deficit, European countries are forced to sell off their gold reserves to raise funds. Recently, Greece has sold 112 tons of gold to raise funds. They are still vulnerable. They will be selling more in near future.
• Gold investors are afraid to keep gold in hand and are looking to sell it off.
• In India, the crash in gold prices has made gold loan companies to sell off their gold, as the yellow metal proved to be unsafe for holding any more. If there is further fall in price of gold, more number of defaults can be expected; hence gold loan companies may not be able to recover their loans through auctions.

These things clearly show that gold prices are most likely to fall further in the near future. So it is better not to purchase gold now, waiting is a good idea. Unless there is an event (like wedding), it is a stupidity to purchase gold today.

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Why Investing in Gold May Be a Bad Idea Today?