Gold and its volatility

In the past few weeks we witnessed a remarkable rise in gold prices followed by a fall. People wondered if the yellow metal is losing its sheen. Is this the time to get out of gold? Sachin Karpe quickly revisits the causes of decline in gold and seeks answers to the pertinent question of ‘whether to stay invested in gold?’

The value and price of gold varies depending on various factors like the value of currencies, particularly the US dollar; commodities, oil price ad economic situations around the world which get affected by events like wars, calamities etc.

Gold which is considered a brilliant hedge against inflation has always caught fancy of investors especially during tough times. The same happened during the Eurozone debt crisis when analysts predicted a collapse of Euro. This prompted investors to withdraw from the Euro and get into assets like gold and US treasuries, making its price go higher. This catapulted the price of gold to a record high leading Indian Rupee to fall tremendously against the US Dollar, raising the inflation which touched 9% last year, feels Sachin Karpe. The condition still persists. Now that Ben Bernarke, chairman of US Federal Reserve has announced a gradual withdrawal of stimulus package of US$ 85 billion to its economy, it signals that US is recovering from the subprime setback. According to Sachin Karpe, this step has sent out a positive sentiment among people who do not feel the need to invest in gold for hedges. This has shortened the demand and lowered the price, globally.