Gold may not shine again in 2016, says Amit Rathi
Investment in Gold has not brought notable returns in the last two years, to elaborate, in rupee terms, spot gold ended with 6 per cent negative returns in 2015 and around 8.5 per cent negative CAGR during 2013-15 and this year is expected to remain same. Anand Rathi Financial Services pulls out five reasons which are disturbing market for gold and depressing inclination in 2016.
Firstly, Dollar is exhibiting upward trend and is emerging strongest against rest of the world currencies. At the time that US central bank is following more stringent monetary policies after almost nine years, an increase in demand for dollar is anticipated which would affect other related commodities such as such as gold, silver, oil and copper. Secondly, since India is largest importer of gold and demand is likely to fall, thus the impact would come directly on the price. Thirdly, savings in financial instruments like fixed deposits, bonds and equity have heightened due to improved economic growth and negative returns by gold in preceding three years. As a matter of fact, the financial instruments have witnessed surge of investments from roughly 35 percent to 40 percent in last two years. Fourthly, the government scheme of gold monetization which implicates reprocessing of existing gold held by Indian households and temples would significantly trim import of gold and will result in further cut of price. Lastly, gold is also used as anti-inflationary tool and is also termed as hedge against inflation. In consideration of deflationary mode of most of the global economies, there is a microscopic chance of inflation in the country, in accordance of same, the desire to hold gold will be comparatively less eventually the necessity for gold acquisition would reduce; in that event the price determination would get upset.