Gold investors have had to be a patient lot in the last two years. Gold prices have gone nowhere in this time period and investors patience maybe running thin.
Indian gold prices track domestic gold prices and hence if we are to predict whether gold at your local jeweler will climb you first need to understand if gold prices will rally in the international markets. Here are some things that you should watch out.
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Interest rate hikes in the US
When interest rates are hiked in the US, individuals would sell gold and buy bonds. As we write the US jobs data has come in at very robust levels and there is a likelihood that the US Fed would increase interest rates in the US. This would be one of the biggest events for gold in the coming months. Analysts are not sure whether the hike would come in June or Sept. But, it looks certain that the hike could come sometime this year.
Expect gold prices to fall as and when it happens.
Worries over Greece
Greece is seeking bailout funds from the its creditors. If no agreement is reached and the crisis turns ugly with Greece forced to leave the Euro, be rest assured that gold prices would rally. This is another major event that could move gold prices.
Movement of Indian rupee against the dollar
If the rupee falls against the dollar it makes gold more expensive. An upbeat US jobs data would mean that interest rates there are hiked sooner than later. This could mean that there could be some exodus of funds from foreign portfolio investors in India putting pressure on the rupee, thus making landed gold more expensive. Bets against that happening can be considered as rather high. This is because the rupee could depreciate rather sharply.
So where would gold be by the end of the year?
It's a very difficult call to make as to where domestic prices of gold could be. If Greece exits Euro you are most certainly going to see gold rallying. The odds of that happening is still not very high. If
Greece stays in the euro, gold would be a bad investment, simply because interest rates in the US is likely to rise this year, putting pressure on gold.
All in all a difficult thing to predict. If you want to diversify your portfolio gold maybe a decent bet, however, it should not form a significant part of your portfolio.