Gold: Will it shine for the 9th successive year in 2013?

Updated: Monday, December 31, 2012, 9:19 [IST]

As we usher in 2013, Gold is witnessing a subdued performance, with global prices falling to a near 4-month low.

Nonetheless, it is still ending the year with gains for the eighth successive year in a row. In fact, it has virtually doubled in the last four years.

The reason why gold has rallied in the last few years, is because there has been an economic mayhem since 2008, when the Lehman Brothers crisis first erupted. Investors flush with funds had very little avenues to find shelter since equities were in a complete mess and hence found shelter in gold. This led to a sharp rally in gold in the last four years. However, economic data from around the globe is improving rapidly, which means there might be a shift from gold back into equities in the next year, dimming the outlook for gold.

Europe, which has been a thorn in the flesh is seeing remarkable improvement. Problems in Greece is on the backburner, though economic data in the region is still worrisome. US has seen economic greenshoots emerging and hence should see improved economic data, which should see fresh money infusion into equities.

In fact, since September equities have rallied consistently, while gold has gradually dipped since then. It's likely that the same trend would continue unless economic chaos, including the fiscal cliff in the US, sees the world's largest economy teetering and faltering.

All in all, it looks a little tricky for gold going forward. Unless things take a turn for the worse as far as the global economy is concerned investors are unlikely to chose gold. Also, the easing across the globe has led to substantial amount of liquidity across the globe, which needs to be deployed. Gold futures is currently trading at $1656, as against a rate of more than $1705 prevailing in September 2012.

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