Analysis of Gold prices

It’s common for any investor that investment in gold is considered as risk aversion. In times of uncertainty and equity market meltdown, investors folks to diverse their investment into the precious yellow metal. For the past three years, gold has been consistently giving positive returns year after year. Intermittently in the international market gold has reached a peak of $1900.

With the never ending European financial crisis, the gold is now trading around $1600. With the elections out in France and Greece, with change in government prompting for further financial crisis instead of any good steps to curtain the down fall, the euro started to show its weakness against the greenback and the precious yellow metal started to come down. For the whole of last week the gold was trading down and hovers around its crucial support level of $1550.

What’s in store for local investor?

The gold is trading in the local market around Rs.28000 to Rs.29000 and the local investors are got into a double whammy of rupee depreciation and high gold price. Even though the gold has just moved up by 3 per cent in the international market during last year, the local price has moved up by more than 25 per cent and holding strong at this level without any reprieve. This is mainly because of the local gold buyer has to pay in dollar for any purchase and the concurrent rupee conversion does affect the end rate, i.e. local price. With the rupee depreciating nearly 18 per cent and its been holding the local price at the above mentioned levels. The international gold price is expected to hold at $1550 levels which is near term support. So its better for local investor to stay in the sidelines and also look for the rupee appreciation as it will bring the cost.