Government discouraging gold consumption

India is among the biggest consumers of gold. The government's push to reduce gold consumption through the Gold Monetization scheme and Gold Bonds, is likely to reduce demand. Hence, as demand for physical gold reduces, gold prices could stagnate or fall. As an investment it may make gold a bad proposition.

Lack of triggers for a rally

Things are rather calm on the global front at the moment. Gold cannot rally in the absence of geo-political tensions or economic chaos. At the moment we cannot see that happening. Every political and economic crises in the past has led to a rally, in Gold whether the Lehman Brother crisis or Middle East tensions.

Threat of US Fed hiking interest rates

The US Federal Reserve is set to meet in June and most analyst are expecting a 25 basis points interest rate hike.

When interest rates are hiked investors move money from gold and equities into fixed interest yielding securities. Not good news for gold.

Gold and rupee movement

India imports gold and hence, a lot depends on how the rupee moves against the dollar. It is unlikely that the rupee would fall too much against the dollar, which means gold imports are unlikely to become costlier.

India's currency reserves are strong and the current account deficit is low. Chances of the rupee falling dramatically from these levels is very less.

Storage charges, threat of theft

Gold as an investment is bad because it also needs storage facilities. If you store at home there is a risk of theft and a bank locker means more expense.

Also, the buy and sell margins on gold are huge, which makes it difficult to make money. If you are forced to buy for marriage or occasions that is fine, or else as an investment it is not the best bet.

Gold and dollar movement

Gold and dollar are inversely related. Gold prices fall when the dollar rises. The dollar is unlikely to fall, as the US economy remains strong. Thus, gold may not find too much support from a rising dollar.