The GOLD Rush.

>> Sunday, November 2, 2008

The James Bond movie ‘Diamonds are Forever’ was a memorable one.

Those who invested in Gold since the last calendar quarter of 2007 even as the equity markets in India rolled on like an unstoppable juggernaut, too would have found the experience memorable.

To cut to facts, Gold prices ascended vertically even as equity markets the world over tanked and even topped the USD 1000 mark for a while. During this period, the yellow metal which has historically been used as a hedge against rising inflation and falling prices of other asset classes has been shining brightly.

The proverbial million dollar question now is …. Is this price level for gold sustainable ?

The primary reason for higher gold prices can be attributed to the weakening of the US economy which has led to further depreciation of the dollar as compared to other major currencies. Further, falling equity markets throughout the globe has made investors look for safer avenues of investment. Rising crude prices too contributed to the upswing in the price of this precious metal.

For now, it is well within the realm of possibility that in the event of another equity meltdown which seems likely, gold prices may again ascend towards the USD 1000 mark. Nevertheless short-term investors should tread cautiously in the near term as like all other class of investments there is always a risk attached, given that gold prices too have turned very volatile.

However, in the long-term, given the rising global demand for gold against limited known sources of supply, coupled with the host of factors mentioned above and last but not the least, compounded by the spectre of terror strikes across the globe, chances are, Gold remains a decent bet as the Asset class of choice on the Risk-Reward scales.

Gold, thus, to my mind, is Forever.

Happy Investing.

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