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Saturday, 23 March 2013

Gold - To Buy or Not to Buy!!

I was discussing investments with a very senior investor, someone who has been in the Indian markets for nearly over 50 years and has his finger in nearly all major asset classes - stocks, bonds, gold, real estate in addition to his own business, which these days is managed by his two sons.

While discussing investments, he told me, "Beta, sona kharidna thoda thoda har saal. India mein sona ka bhav girta nahi". I was sure he was wrong. I have seen long term charts of gold and have seen severe price corrections. The chart below is what I have seen multiple times. Which shows gold bugs have not made any money from around 1980 till around 2008 - a fairly long period.

Then when I looked at gold prices in Indian Rupees, the mystery was solved. Look at the chart below for the same period. The difference is the $-INR conversion rate. Dollar has appreciated over the years and compensated for the loss of price in gold, thus keeping the INR price of gold high. Looking at this chart, we can clearly see that there has been no long term bear market in gold in India for over 40 years. And the way the dollar is moving with respect to the rupee, I don't see the trend reversing anytime soon.

So, as Peter Cundill used to say, there is always something to do (and learn) in the markets :-)

Dislcosure: I do not own any investment gold (other than family jewellery).


  1. hi,
    can you advise me a model portfolio at present market scenerio for long term investment. i m ready to take high risk and wait for long term of 3 - 5 years.

    1. It is not practical or advisable to give portfolio advice without knowing any details, and even then it is fraught with risk. Since, it is your money, you need to be convinced about your investments, which can only happen if you know about them sufficiently well.

      Since, you are reading this blog, I am assuming that you are also reading other investment material. So, keep investing and keep learning.

  2. Do you think due to money printing by US will lead to Gold rise in future?? I know this is kind of speculative bet.. Peter Sciff & Kyle Bass are betting on Gold because of QE, PIIGS Crisis , Huge debt of Japan.

    DISC: I hold investment in Gold(may be Peter Bias).

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  4. Had been looking for a INR gold chart for a while - where did you find it?