Gold has no silver lining to it !! A notification issued by the RBI lead to a free fall in the price of yellow metal from almost Rs.28800 to Rs.27200 on the MCX. The whole story in short – 1. Rupee was falling sharply last year - Very high imports was leading to further demand of Dollars against Rupee to pay for these imports. Gold was forming one of the largest and most wasteful part of this import bill. 2. RBI, to save Rupee and country’s economy, brought a notification bringing some restrictions on import of gold – a) one can sell 80 gms gold in India only if he exports 20gms , out of the total 100gms that he imported. B) You can import gold only by making 100% payment, no credit. C) etc...etc..etc.. 3. Now as the Rupee has recovered a whole lot and exports are doing much better to cover the imports, RBI came with some relaxations in the gold import rules - Banks can lend gold to jewellers, some types of export houses which were not allowed to import since the last notification can import gold now. Etc. 4. Thus, supply of gold will increase in India, and as gold prices are falling in international markets, the investment demand for gold is already down. Hence the fall in price as soon as the notification was released. If you are investing for next 10 years, Gold is not the place to be !!
Posted on: Thu, 22 May 2014 16:35:18 +0000
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