Investment Option - Gold

•          Historically gold is one of the most popular investment options.

•          People normally do not invest in gold for returns as it does not provide interest, dividend etc. People generally buy gold as a hedge/protection against crisis & uncertainties.

•          Crisis/uncertainty mainly includes economic ones like stock market crash, inflation, bank failures, low interest rates etc. Crisis can also be political/social - like war, social unrest.

•          Apart from these - gold prices are also decided by demand & supply, sale/purchase of gold reserves by various governments, strength of US Dollar

•          Since 1968 the price of gold on the open market has ranged widely, from a high of $850/oz in 1980, to a low of $253/oz in 1999. Present price is around $975/oz while some analysts predicting $1030 level.

•          Gold prices can move in both direction and it is not generally bought to gain from value appreciation. For example gold fell from 850 Dollars to 253 Dollars from the year 1980 to 1999. It again crossed 850 $ in the year 2008 only. That means those who invested in Gold (in Dollars) in the year 1980 could recover their principal only in 2008.

•          Investment in Gold can be made in physical form or in paper format. Gold Exchange Traded Fund (ETF) is now a days more popular among investors. Gold can also be purchased from select branches of SBI.

•          During the times of economic stability price of gold will be about one half of that of platinum and during recession/crisis/uncertainties gold prices go above platinum prices. Recently we have seen the later situation.

•          Acute power shortage in South Africa (major producer of Gold) is causing supply shortage and Governments are reluctant to sell their gold reserves.

•          Current global recession, bank failures and uncertainty on economic outlook caused a new bull run in gold prices. Further movement of Gold will depend on success or failure of various government stimulus/bailout packages. Demand of gold from consumers is declining due to high prices and many consumers are selling gold to benefit from high prices.