Gold has headed nowhere in the last two years, after having a superb run in the last 10 years prior to that. In fact, gold has given negative returns in the last two years. In early 2012 gold was trading at Rs 31,799 and is currently down to Rs 26,000.
Gold Performance May Remain Dismal
Gold prices may continue to head nowhere in 2015. Domestic prices of gold depend on how international prices of gold move and there are little hopes of an international rally in gold prices. In fact, there is a likelihood that the US Federal Reserve would hike rates in 2015, which would further put pressure on gold prices.
For gold prices to rally economic growth around the world, particularly the US should falter. There seems to be no signs of that happening at the moment. The other factor that could see gold prices rallying is geo-political tensions across the globe. But that seems to have eased at the moment. Therefore, gold's charm as a safe haven asset is waning at the moment.
Gold prices in India are also influenced by the movement of the rupee against the dollar.
When the rupee falls against the dollar gold prices tend to become more expensive on the other hand when the rupee rallies against the dollar gold prices in India become cheaper. The rupee may be steady against the dollar and hence there is likely to be little help from the currency.
Is Gold a Good Investment at the Current Level?
For gold to generate a decent return it has to cross the Rs 29,000 mark from the current levels. That would give returns of more than 9-10 per cent that we currently get from banks. At the moment it is difficult to see that happening. There has to be some economic chaos around the globe or geo-political tensions for gold prices to rally.
At the moment that does not seem to be happening. It's therefore best to stay away from gold at the moment at park money in equities.