New Delhi: The craze among Indians for yellow metal (gold) is well known. Their passion for the precious metal can be gauged from the fact that purchasing gold on most of the festive occasions seems to be endemic in this country. However, amid ongoing decline in the gold prices, people might be preparing to invest in gold but experts advise to decide cautiously on this.
       
Gold prices hit two year low on Tuesday. The sudden decline has triggered buying among masses. People have taken it as an opportunity to purchase the yellow metal. People are buying it for different purposes including investment and personal usage.

Reasons behind gold prices heading south

According to experts, the recent fall in the gold prices during last 5-6 months is one of the rarest incidents to witnessed in last 8-10 years. A record 25 percent decline in the prices of the precious metal has been recorded in recent days.  Different reasons are being cited behind this development.  

-    American economy is on the verge of recovery. Hence, the money which was invested in gold has been diverted to share market. It is considered to be most prominent reason behind fall in the gold prices. American stock markets have witnessed 14 percent growth whereas gold has declined by 13 percent.

-    High prices hitting demand of the yellow metal.

-    The increase in custom duty by the government is also considered to be a reason behind the fall in gold prices. Earlier, traders used to pay 4 percent custom duty which has been increased to 6 percent. The duty hike has also impacted gold import. Gold import has dropped by 24 percent in January-March quarter this year.

BULLISH FUTURE

Many experts are of the view that fall in gold prices may continue for some more time. Normally, gold prices are impacted by fall in the value of dollar but gold prices have remained unaffected with the fall in dollar recently. Experts are quite amazed by the reversal in the trend. Prices are falling despite liberal monetary policies in America, Japan and European countries. However, according to a research, prices may rebound at the end of this year.

STAY CAUTIOUS IN INVESTMENT

Now, it is being estimated that the fall in gold prices will continue. Usually, investment in gold is done for longer period of time. So it is suggested not to park entire corpus into gold. Whereas, limited amount should be invested in gold. Investment in gold should be made for the purpose of stability, safety and diversification instead of profit booking in short duration of time.

JPN/Bureau

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