Indian markets track international gold, where prices recovered slightly after slumping to a four month low. On Friday U.S. gold futures closed at $14.20 after hitting a low around $1,636. At the retail level gold In India continues to remain firm because of the falling rupee.
Gold does not seem to be reacting to positive or negative news and just keeps dropping in the futures market. Even when equity markets were hopeful of a solution to the problems of the fiscal cliff in the US, gold dropped. When there was no sight to a solution also gold dropped.
In the last few years gold has rallied primarily on account of tepid economic environment around the globe. It always tends to jump when the news is not favourable, primarily serving as a hedge. However, these days the metal seems to be tired and fails to march on.
Analysts attribute the steep prices for the metal, as well as the decline in physical consumption, as two of the reasons for a subdued performance.
Also, investors are now diverting a lot of money into ETFs, which has restricted the physical demand for the metal.
Gold is likely move in a narrow range and investors are not too optimistic that the sharp returns of the last 10 years would be repeated in gold in the years to come.
Risky assets, particularly equities are back in vogue as the economic environment seems to be settling globally. Chinese and data from the US has been encouraging, while the reforms in developing countries like India is pushing optimism. Also, problems in Europe particularly Greece are now on the back burner. Therefore, with the economic environment improving, equities would be a preferable option for investors. then gold.