A few days back there was a post saying why you should buy gold. Of course there could be enough reasons to sell gold. I could not think of many more reasons, here are a few:
1. It is a contrarian call – when every body is buying, maybe selling makes sense (oops you could have gone wrong last month!)
2. The amount of oil, aluminium, silver that you can buy with gold is at all time high. Normally the correction starts when you hit such new highs. Or is it that all metals are high so gold can get higher?
3. If all the governments ‘know’ that printing notes is not as sensible as ‘selling’ gold from their reserves, will they not resort to selling gold? A little selling by Germany, IMF, and USA is enough to meet the appetite of all the RETAIL demand for gold consumption!
4. Bet against the over-rated analysts – who have predicted a bull run, is it not worth betting a little against them?
5. I have no idea about China, but the Indian consumer will baulk at the price. In Delhi and Mumbai ‘imitation jewelry’ is what the bride is wearing. Six months in a row Indian imports have fallen. Funnily one community known to be a big buyer of gold has shifted from gold quantum to Rupee quantum of gold. So a bride is asked to bring ‘Rs. 400,000 of gold instead of ‘x’ tolas of gold’. This is a very significant and important shift.
6. Retail demand is crucial to price – not the ‘gold funds’ or sovereign funds. So if there is a slowdown, prices will come down.
7. At least one jeweler said in an interview “if one bangle translates to a vacation in a foreign location, people are taking the vacation!”. This means gold is getting recycled at a faster rate – seen from stagnating retail sales (in quantum) and falling imports.
8. A slow down in the Gulf means many ‘Keralites’ are coming back to India from the UAE – their bread will come from selling gold. Finding a job in Kerala when 1 Million unemployed people are looking for jobs will not be as easy as selling gold.
9. Investment demand is fickle minded. If there is some signal that money is getting dearer gold could move into cash and bank fixed deposits. Australia has increased rates, India will increase in the next quarter perhaps? Real estate companies could offer better fixed deposit rates – with the provisioning norms changing.
Be ready for a change.
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