Are Gold Prices Going To Hit Record In India If Britain Exits The EU?
The price of 24k gold in India at the start of the year was around 24,900 per 10 grammes. As we write it has scaled a new 2016 peak of Rs 29,750 per 10 grammes.
Check gold rates in India here
Now let us see if Britain really exits the Eurozone
Not a single poll that we have read in the last 5 days suggest that Britain would stay in the euro. Four online polls recently have given leaving the EU as an edge, while Britain's largest English newspaper, the Sun has asked people to vote for an exit.
Read about Brexit and impact on India
The really worry for markets at the moment is that if the country does leave the Eurozone, it may led to disintegration of the Eurozone. At the moment that maybe a little exaggerated.
Two things could happen with gold:
1) International prices could rally
When international prices rally, domestic gold prices in India tend to go higher. Indian gold prices track international gold prices and this could push Indian gold prices higher.
2) The rupee could fall making gold prices expensive
When the rupee falls against the dollar, it could increase the landed cost of gold in India pushing gold prices higher. For example, if there is a 2 per cent fall in the rupee against the dollar, gold prices in India would automatically increase by 2 per cent, assuming that gold prices in the international markets stay where they are.
It also means we could see a further rally in gold prices in India.
All forms of gold have done well this year. These include Gold ETFs, which have very low holding charges.
In any case, since the outcome of the Brexit is unclear, we believe you can still buy some gold in the electronic form and hold. You may end-up getting a good 10 per cent return in the short term.
Having said that we must emphasize that polls have got it horribly wrong in the recent past including the British elections. So, in case there is no Brexit, be prepared to see some sell-off in gold. This means it could also fall from the current levels.
Difficult to say which way the pendulum would swing. That's what makes all investments interesting, because you do not know whether an outcome would be favourable or not.
GoodReturns.in