Everything you need to know about the gold market slump
A few days back, gold prices hit a two year low in India, when both standard and pure gold dropped by INR 520. So what does this mean for Indian investors? Should you capitalise on the low prices and buy a lot of gold? Or should you wait and see if the prices drop lower?
The same situation is prevailing over the rest of the world. In fact, according to a recent Forbes report, gold prices may drop even lower, to almost 50% of its previous market value. Let’s take a look at why gold prices are going down and what to do when gold prices are falling.
The World Scenario
The main reason why gold prices are falling is the activities of the current world superpowers, China and USA.
China caused a major slump in gold prices all over the world after it poured a ridiculous amount of gold into the market. Almost 33 tonnes of gold were sold in the Shanghai spot market on 27th July 2015 as investors scrambled to shift their money into greener pastures.
On the other side of the globe, the US dollar has hit a three month high, making it harder to buy gold with weaker currencies and effectively reducing the demand in these economies. This reduced demand has caused a downfall for the lustrous metal, which is finding it hard to maintain its shine in small economies. Furthermore, if the interest rates in US markets go higher, investors will run towards the dollar for higher returns. This will make the dollar even stronger and reduce the cost of gold even more.
The Indian Scenario
Domestic gold inventories are filled to the brim with gold. Most of this gold is acquired by the rural population, many of whom do not have access to formal banking institutions. Indian farmers are heavily dependent on the monsoon for their livelihood and the uncertainty of rains is causing them to hold back on their gold purchases.
Even if the demand for gold rises during the wedding season, there is still very low demand right now. This along with stringent RBI measures to reduce gold imports has affected domestic prices to a large extent. Many gold investors are also shifting towards the equity sector, which is emerging as a lucrative option to acquire assets for future investment prospects.
What You Need To Do
If you already invested in gold or if you’re looking to make a hefty gold investment, this is not the right time to do it. Instead, here are a few tips to recover from falling gold prices.
- Hold On to Your Money
Observe the markets for sometime and see how they fluctuate. If possible, avail the services of a seasoned investor and find out what you can do with your existing gold and how can maximise your profits.
- Buy Some Real Estate
Take your money and use it as loan down payment on a good property. If you were looking at a long term investment in gold, the housing market isn’t far behind. To help you with your investment you can turn to companies like Bajaj Finserv who offer online home loans at attractive interest rates. A real estate investment gives you guaranteed returns in the form of its rental and resale value.
- Make a Fixed Deposit:
Fixed deposits are the best short-term investments you can make. High interest rates and a wide tenure range make them an ideal choice if you want to wait for the gold market to rise again. Now you can even make a fixed deposit from the comfort of your home on the Bajaj Finserv website.
- Invest in Mutual Funds
Mutual funds are a great way to make an investment in high risk sectors; you can neutralise the risk by investing in highly stable sectors at the same time. If you avail the services of financial institutions like Bajaj Finserv, you can diversify your investments and still turn a profit if one of them goes down.