When to buy gold?

With the festival season a dawn away and so the seasons for marriages, you might come across with lot of speculations and discussion regarding the right price at which one should purchase gold. There is no formula for the right price but of course there is some relation which can help us reaching near to bottommost strike price

Gold is considered as a safest investment the very natural reason being; Gold gets consumed when it is transformed into jewellery etc (not unlike oil which cannot be restored to its original state) but can be also restored to the original state.

Indians have a high regard for Gold and so being an Indian do I have, it is considered a symbol of prosperity, richness, wealth etc. My love for gold and desire can’t be expressed in words but in short it is more that the fairer sex have. I remember purchase 10 gms of gold for 4400 Rupees in the year 1997, well that purchase was purely for trading purpose and to earn some profit within a short term. The entire transaction was for 10000 odd rupees and I got 22.somtheing.something gms of gold. That time I was not that matured to understand the integrities of price movement but since then, the net present value of my investment was tripled by 2007 and till date this holds true.

Very late I discovered that it is not only the demand of jewellery that is pushing the demand but it is something else that is working in the background. Gold is basically the safest investment and mostly used for hedging and to safeguard nation’s interest from worldwide economic shocks or tensions. The so called economic shock is because of US Dollar fluctuations.

With dollar appreciating in the recent trade will push the gold prices south, well there is not algorithm/mathematics for there price relation but if you have closely observed the relative price movement of US dollar and Gold you might have seen a reciprocal relation between there prices.

When the dollar weakens on the foreign exchange market over an extended period then the Gold price will generally rise during the same period; and when the dollar strengthens over many months the Gold price will usually fall.

With the downturn investors holding gold reserves sold their gold to make up the losses made, Ordinary people too sold their gold jewelry during recession, which increased the supply of gold in the open market and the price was stagnant.

With economy shaping up if the dollar price moves south then there are changes for gold prices to head north, so if you are an investor or planning to purchase jewellery that probably this might be the right time to purchase.

In future too if you have planned to purchase gold then keep a watch on the dollar/ rupee movement; may be that you can get a better strike price.