Until a week back, if any expert would suggest buying gold and selling shares, nobody would have acted on his suggestions.
The carnage in global stock markets is now making investors rethink their bets on gold. In the international markets gold was trading at a 7 week high as the dollar fell and investors sold heavily into shares.
Spot gold was trading at $1,153 an ounce. The metal has reached the highest level since July and has now gained in the early part of this week even after its 4 percent rally last week.
So is gold back all over again?
Immediately after the Lehman Brothers crisis erupted gold had a fantastic rally for a good 6 years. But, very few are comparing the current Chinese economic slowdown to the Lehman Brothers crisis. So, gold may see some positive trend, but, for it to have a solid and sustained bull run, maybe a little far fetched.
Gold prices in Mumbai have already seen a near 8 per cent jump in prices. From levels of Rs 25,210 per 10 grams it has gone up to Rs 27,370 per 10 grams. One reason of course is the international rally in gold prices and the other is the sharp fall in the rupee against the dollar, which has made gold imports expensive and hence gold prices.
While the stock market carnage may push gold prices higher, investors have always been told to diversify, which is one reason why the prices are likely to go even higher.
The question is whether you should buy gold amidst the global stock market carnage?
Gold is an excellent bet against bad times and should always be a part of the portfolio. Hence, if you have never bought gold, it is a good idea to hold gold as a part of your portfolio. If you already have a large investment in gold, it makes no sense to add more, since there is very little possibility of a stupendous rally.