Is it time to Sell Gold or Buy Gold?
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Today Gold has reached a lifetime high at above Rs. 41600 per 10 gm. In a span of less than 10 months Gold has turned from Rs. 32000 per 10 gm to about Rs. 42000 per 10 gm.
It has increased by more than 33% over a year.
Gold is a precious metal, which exists in substance, mostly it has an inverse relationship with the equity market. Whenever the equity market is in confidence, people avoid investing in this yellow metal & prices generally either do down or remain stable. And whenever equity market crashes or face downfall, this metal becomes the first choice of investors and thereby shoot in prices.
From last year, we can see the Sensex & Gold are moving in a linear path.
Sensex has turned to 41000 from 36000 in the span of 7-8 months & gold has reached about 42000 from 33000 in the last 7-8 months.
Why the inverse relationship did not work last year?
Following are the possible reasons to have a bull run in Gold in spite of bull run in Sensex: -
- Sensex is growing on the base of a few large-cap stocks like HDFC Bank, Asian Paints, TCS, Reliance, Titan etc. Mid-cap & small-cap is still under huge corrections, most of the banking stocks are flatten, so the growing Sensex actually do not represent the entire equity market. Huge investors have withdrawn the money from the market & shifted to bullions like Gold, which has indirectly boosted its price to a new high.
- Growing tensions over Trade-related issues between US & China, Economy slowdowns have shifted the attention of investors to a much safer avenue like Gold. Continuous rift on trade talks did not ease the tensions of investors which induced them to increase their stake in the Gold. With huge investments, Gold prices are touching every day a new high.
- Common man ran behind the market sentiments, because of various economic & global developments, Gold was taking a good & safe avenue to park the funds for large investors, and due to constant price hikes, it has attracted the retail investors also to liquidate & shift their savings & investments in mutual funds & FDs to Gold, which again have taken its prices up.
Now the question arises, should I buy gold now or sell gold now: -
- Since Gold is a global precious commodity & the institutional investors and major country’s government’s funds are parked in it. So, it is comparatively safe in the vent of any Global disputes or economy crash. So, if you already have Gold, you can stay in it. It can have up & downs but rare to crash.
- Even if you liquidate the funds, where to invest, FDs have very less rates, the equity market is in an uncertain situation, overall corporate’s financial situations are not indicating a positive correction in mid-caps & small caps in the near term.
- If you are planning to invest in Gold by liquidating your other investments or with fresh saving, it is advisable to wait for little dips & corrections.
- If you are having a large portion parked in Gold, it is the time you can part book the profit.
Disclaimer: - Above are the personal opinion of the author, please do not take it as legal advice.