Gold Investment In India May Not Be Lucrative Now

I know, I am writing on a topic that many may not approve in India, but this is some fact that may not be avoidable. Indians have a die-hard passion for Gold which has maintained India’s number-one position as the World’s largest Gold consumer. This has also contributed to the second largest cause for India’s large Current Account Deficit.

Rupee decline pushed Gold Prices to Record Highs:
The sharp decline of around 25% in the Rupee versus the U.S. Dollar has been the only cause for the sharp rise in Gold Prices in India since 2011. Comex Gold Futures had hit a record high of around $1921 in Sep 2011 when the Indian Currency - the INR was around 15 to the U.S. Dollar. Gold Prices have declined ever since in the Comex Gold Markets, and have thrice fallen to around $1525. Gold Futures quoted around Rs. 28,200 per 10 grams in Sep 2011 when Comex Gold Prices were around $1921. The Rupee started its sharp downward journey from 45/US$ since September 2011, and hit a bottom of over 58/US$ in 2012, a fall of over 25%. Gold Prices climbed higher on the back of a weak Rupee, and hit an all time high. The June expiry MCX Gold contract trading today around Rs. 28,945 had hit a high of around Rs. 33,517 last year. Gold slumped by 20% to $1525 from $1921 on the Comex, and at the same time zoomed up by 20% to Rs. 33,517 from Rs. 28,200 per 10 grams in September 2011.

The U.S. Dollar fall will push Comex Gold Prices Higher but not so in India:
The above explanation does not mean - nor do I intend to say - that prices for the yellow metal will not rise. What I mean is that Bullion Prices in U.S. Dollar terms will explode, but the same effect may not be completely applicable to the Gold Prices in Indian Markets. Comex Gold Prices are bound to rise sharply as soon as the U.S. Dollar starts descending. This same descent will also be seen against the Indian Rupee, which will keep MCX Gold Prices in check. Prices for the yellow metal in India will surely rise from current sharp dips, but do not expect MCX Gold Prices to rise to lofty levels of Rs. 33,000 and above to be seen again in the near future, unless there is some drastic economic blunder in India.

I emphasize again that Silver Investment would generate better returns as compared to Gold Bullion.