Indian Gold Market: Outlook 2015

Indian gold market

Be prepared to sing the song ‘Sona Nahi Na Sahi, Chaandi Nahi Na Sahi, Fikar Kya Hai Main Hoon Na Tere Liye from the movie One Two ka Four from now on!

Why? Well, if you have plans to invest in the Gold market of India this season, take it slow! You are in for a slightly rude shock… especially if you are Gold crazy! This report will bust a few myths and will also tell you how much to actually invest in Gold if you really want to buy it.

Gold is the second-largest import item for India after the petroleum goods. A higher gold-import bill is adversely affecting the country’s current account deficit (CAD) and the sudden hike in import duty is worsening the situation even more!

The Current Situation

  • Currently, theUS economy is emerging from a slump and this is leading to their Federal Reserve hiking interest rates on import of Gold bars and biscuits (bullion)again. This may be good for their economy, but the strengthening force of the US Dollar is weakening the global Gold market.
  • Since the US is tightening its monetary policies, Gold’s global value is taking a massive hit which is spelling like doomsday for India – where people eat, sleep, breathe and even fart Gold!
  • The reduction in custom duty for Gold has declined its prices in India and currently it is around the INR. 27615 mark on the MCX index. Experts had believed that it will breach the INR.25000 mark, but it has not gone down INR 26500 until now which is sad for people who wish to invest in Gold.
  • If predictions are to be believed, Gold prices are on the rise now since the wedding season is coming to an end and this might see Gold M retail at INR 27900 and above. Gold Guinea might retail at INR. 22000 since the market is not willing to stabilize.

Future of your beloved ‘Bullion’ In India?

  • Gold prices did fall on AkshayaTritiya, but not everyone can buy Gold in one swoop! After all, 10 grams is nothing!
  • If the new Gold import norms do not come into being soon, Gold prices are bound to rise and will go beyond the sub-28k mark if India does come up with a magical solution.
  • If that happens, the jewellery market as well as Gold traders will benefit from massive sales since the sales will go up. People always love to buy Gold when its prices drop at an all-time low.

Government Actions Leading To Serious Ramifications

  • The current customs duty imposed on Gold is valued at 10 percent, however in the recently announced Budget this percentage has been hiked by3 percent instead!
  • The government has scrapped the blatant Gold import norms called the ’80:20′ scheme, wherein 20 units had to be explicitly exported for every import of 100 units of Gold. This move was potentially thought to be positive for the market, but it seems to have failed to support Gold sales since demand is at an all-time low.
  • Why? Because Gold reserves are dwindling since Indian households have more Gold than the Indian government has! Every year the govt. has to release more bullion into the market to help keep it stable, but this is leading to shortage of Indian-made Gold.
  • To desist people from buying Gold, the govt. has no other option but to hike the import duty.
  • Reduction in customs duty in the next budgetas per the expectation can result into fall in Gold prices. Many experts believes that positive outlook for Gold trading due to decrease in customs duty will emerge as significant tool to bring stability in Indian Gold market.
  • To boost export, RBI has eased Gold import norms, which is a great sign towards strengthening Indian Gold market.

What Should You Do?

  • Unless you have to gift someone Gold or have a marriage to see through, buying Gold in excess is a bad choice right now, especially from an investor’s point-of-view.
  • To keep it simple, consider this, the Gold that you buy today at sub-27k might reach sub-28k, but you cannot sell it at that value if you have physical Gold in your locker. Why? Processing and making charges are cut every time you make a transaction in Gold!
  • Gold is on the decline now, but that has no link with long-term investing. Gold’s value is set to hit an all-time low in the next decade. Why? Because the yellow metal is being substituted by Platinum and Diamonds. Don’t get us wrong! Gold will never be as cheap as you think it might be, it is just losing its overall charm due to such steep prices in the current market.

Outlook For 2015 And Beyond?

  • Buy Gold, but in small numbers only! Do not think that investing in sub27k Gold will make you immense profits when it reaches sub-30k in the future. Why? Since market conditions can alter in a snap-second! Do not speculate if you have limited money.
  • Invest only 10% of your savings in Gold. That is the smarter way to do it, if you really want to take the plunge. Investing in Gold stocks is better than buying physical Gold. That way, you are not stuck with an asset that can suddenly depreciate in value.
  • Gold prices are low in India for the moment, but sales are yet not that high since Gold Premiums are going slow because base-Gold price fell at USD 1,240.61 from USD 1,243.06 an ounce.The numbers may seem small, but add up to a lot when bought in bulk.
  • Since China’s Gold demand has fallen, India’s exports are seeing a massive hit.
  • Further decline in Gold prices will see the Gold mines fuming and this will lead to the cost rising to about $1,300 an ounce. Imagine the price of Gold then!

Gold will trade ahead with a broad negative bias and chances of sharp recovery are slim. The volatile state of the Indian rupee and govt. interventions on the Gold imports are hampering sentiments.

To sum it up, buy it, but in small quantities only! Investing in more than 50 grams for the long run might see you crying in the future. If you want to keep your assets secure, act smart and read the advice above diligently!

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