Panic Buying in Last Resort of Investment
By Biswajit Behera
Whenever Gold traded above 30,000 psychological level, it's an alarm button for Indian household.
What leads gold to sustain above 30,000 level? Why Indian investor should not be worried?
What leads Gold to sustain above 30,000 level?
Historically, we have seen Gold rally during time of turmoil or uncertainty in Global growth. Definitely the question arises in our mind, Why Gold price to be increase when there is an uncertainty. Yes, when there is an uncertainty in the global market it impacts investment related product such as Equity, Fixed Income and other alternative investment hence it forced global investors to park their money in last resort of investment.
Since 2008 crisis, Global central banker have cut interest rate many times and some countries its negative, they have injected around 13 trillion Dollar into the global financial system through various Quantitative Easing programs. But despite these unprecedented measures, the global economy is still struggling. During 2008 crisis, Gold price was around 10,000 and now it's trading around 32,000.
Gold is always acts as insurance for investor to safeguard their investment during turmoil.
In one of my article, I have mentioned we may see volatility in Gold from June onwards towards $1380 level.
After BRIEXIT, Global investor have shifted their money into Gold. Holding in Gold-backed exchange traded fund surpassed 2,000 ton level which is highest since July 2013.
Why Indian investor should not be worried?
Indian household buy physical gold for weeding or as an appetite to hold it. They don't buy it as investment horizon like for short-term basis to gain some return. This rally in gold due to recent UK exit from European Union hence global investor parked their money in last resort of investment. So Indian household should not worried on short-term volatility.
When we say gold will continue to rally it means we have doubt on global growth. Yes, Global uncertainty still persist and to be continue for few year. But uncertainty is for time-being whereas growth is certain hence my view for Gold is in long-term bearish. My view for Gold is remain unchanged despite uncertainty and volatility we can see price towards 28000 level in end of 2016.
(Biswajit Behera is a Certified Equity Research Analyst and the views expressed in this article are those of the author)