Is it Worth Buying, When Gold is Falling?

Hello Gruhinis

Your eyes must be sparkling like an uncut diamond that sparkles in a gold ring…

You must have called up your jeweller several times in last week…

Or you might be nudging the spouse to postpone that Pepperfry furniture order to next month.

I shopped a lot in the recent flash sale and yet I have  been calling up my jeweller every other day. 

All is  fair in our love for gold. Isn’t it?

 The yellow metal has become cheaper by  6-7% since the beginning of this year. As a Money Savvy Gruhini, I am sure you want to know if its the best time to buy gold or not?

Will Prices Fall Further?

Analysts who track international gold prices are of the opinion that gold prices could further go south. Large investing companies or banks invest lot of their money in precious commodities such as gold, silver and other metals via financial instruments that are traded on exchanges. So when these big investors want to sell their investment in commodities, which they are doing now, the prices of those commodities fall. That’s why Goldman Sachs, a large US Based investment group has predicted in this report that prices could go down further. 

However, keep in mind that if prices fall lets say 4% more, then its not like that you will get it 4% cheaper. You will have to cough up value added taxes (VAT) other charges to the cost of the jewellery. For instance my jeweler tells me that the rate for 22 karat gold jewellery has dropped from Rs 2524 (per gram) to Rs 2486 (per gram) in last two days which means i just buy it cheaper only by Rs 38 per gram.

Should you Buy Gold Jewellery Now?

Look at the price your jeweller is offering? If he hasn’t reduced his gold prices over last few days, then may be you can wait for few more days to see if analysts predictions come true. But don’t wait beyond that. As festival season approaches, you may not see these prices as demand in India will push up gold prices:

BUY Gold jewellery for enhancing your wardrobe. BUY it for the forthcoming wedding or a family function BUT..

DO NOT buy it to Dump it in your locker.  DO NOT buy it thinking that your 8 year old daughter will need it as her stree-dhan

Should you INVEST in gold now? 

I know lot of my Gruhinis who are reading this perhaps invest their savings only in gold as that is the only investment instrument they can relate to or understand. I don’t consider buying gold jewellery as an investment. It certainly gives me comfort that tomorrow if our banks get shut (a very remote possibility) like its happening in Greece, then we can run away with our gold coins and jewellery. And that’s about it.

Gold as an investment forms just 10-15% of my total financial investments, a reasonable benchmark recommended by financial planning experts as well.  One can invest in gold through exchange traded funds (ETF) or Gold ETFs. When you buy a gold ETF from a mutual fund, it buys physical gold and keeps its with a custodian and you get to own gold shares in electronic format which can be traded just like shares. Unlike physical gold coins which you need to keep it in bank locker, gold ETFs will remain safe in your demat account. Ofcourse there are little costs attached to it but isn’t it better than encouraging theft at home?

So if you are already holding 10-15% of your total investment portfolio in gold via exchange traded funds (gold ETFs) or even gold coins (although it won’t be easily liquidated like a gold ETF), you need not call your jeweller right away!!

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Rachna Monga Koppikar, is an AMFI Registered Mutual Fund Distributor and founder of this blog. She is on a mission to help Women create and preserve wealth through mutual fund investing.