Sunday, November 15, 2009

FUTURE OF GOLD.


In this article I will not be focusing neither I will discuss the common reasons of gold prices climbing high. The falling dollar, rising inflation neither central banks buying/selling of gold. In this article I have tried to bring out the invisible forms of future gold demand and price.
Gold is now a dream for the Indian marriage occasion. Gold prices have moved up from Rs 11,785 per 10g to Rs 17000 in a year giving 44% annualized return. The recent news that RBI purchased 200 tonnes of IMF gold for $6.7 billion spooked the prices to 17000 levels.IMF gold sales was in order as per the agreements between the Asian countries. Their is some more reasons for this yellow color metal to shine.
 The CME Group announced yesterday that it will now accept gold as trading collateral for exchange members for all its exchange products.

 This is the first time a recognised exchange has allowed the commodity as an accepted collateral asset.
 Under the new ruling the CME will allow each exchange member to lodge up to $200m worth of physical gold as collateral against its open trading positions.
 This also revels that gold is now being replaced by currency and in the coming days we will find NSE and BSE and other exchanges going for Gold as a collateral.

Crucially the CME’s decision highlights a growing theme in the global economy, with international investors turning away from America. Using gold bullion as a collateral reserve provides traders with another alternative to the US Dollar and US Debt Securities, which predominantly feature as trading collateral

FUTURE GOLD PRICES.
Up,up and away is the reply of the above question. It’s not due to that inflation will rise and gold will be used to hedge against inflation or IMF will sale more gold. Neither due to the factor that Gold will replace dollar or gold will rise more due to falling dollar. It has something more to add fuel to the fire.
 Vietnamese government has lifted its import ban on gold

 Vietnam's central bank on Wednesday lifted a 1-1/2-year-old ban on gold imports in a bid to stabilize the market after a sharp rise in prices helped drive the country's dong currency to a record low.

 Vietnam consumed 115.8 tonnes of gold for jewellery and investment in 2008, up from 77.5 tonnes in 2007.

 Vietnam recorded the world's largest domestic demand for investment bars in the first quarter of 2008, with almost 39 tonnes of gold bars in the period, equivalent to 39% of investment bar demand for the quarter

 Five or six companies would be allowed to import unlimited quantities of gold

 When jewellery is added into the equation, Vietnamese demand in that quarter was just 8% of the world's jewellery and investment bar combined.

Now its clear that gold prices will scale up more high beating the economist expectation. Very soon we will find economist making new calculation of future gold prices. Along with other factors of inflation and currency the gold will now head extreme high. As new routes are coming out for using the yellow metal not only in asset demand form but also in other forms of using as investments.
Couple of months back in of my articles I wrote that china was building huge reserves of gold.
http://ianalysis.blogspot.com/2009/09/hidden-reasons-for-higher-gold-price.html
So putting all together not getting into any technical chart analysis of gold prices the upcoming future demand is the only factor which will play the game. Now please make a note. In the next 5 years gold will be trading around 22000-25000 levels. So keep investing in gold and keep a side of your portfolio in gold .Make investment is gold just like an SIP.

2 comments:

Chirag Kabani

Good Article on Gold

Thanks For Shareing your views

www.askchirag.com

akansha

Thanks a lot for explaining in such a lucid manner.

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