As usual, I do not have an answer. However I can lead you to the definition of “Irrational Exuberance”…I hope at least some of you know its association with Alan Greenspan!

Well this is what it means:

When all people believe that:

•    The reward will outweigh the risk
•    This time it will be different
•    Any setbacks will only be temporary
•    Anyone who disagrees with the above is stupid

Is gold in that territory? Well it over do its performance in 2011. So it may consolidate in 2012….and like any volatile asset class…it could do well in 2012/13…but all are guess work.

Frankly it could be an asset class that will do you proud…………but it may not too 🙂

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  1. Like always, your approach to investment in Gold filled with caution but the gravity defying run up it has had over the last couple of years makes one wonder whether he has been left out.

    Thanks to the jewelers strike, the nations Gold imports fell substantially in March but now that all are back to work, the acquisition mode will only consolidate further.

    What say?

  2. Ravinder, you buy gold because of what Economists call the ‘greater fool theory’ – one person HAS to believe that the price of gold should be Rs. 50,000 so that you can sell it to him at that price. Assets like equity and debt are backed by cash flows. Gold by hope and Central bankers printing machines.

  3. Real Estatae and Gold Post of Subra always have tremendous arguments and counter Arguments.Just check no of entries in both gold and real estate after 2-3 days… Yes Ramesh ,Point No 4 …is a clear clincher…. Thks subra for being diffrent

  4. Why RBI & other BRICS nation’s Central Bank are buying Gold aggressively since 2008 while IMF & European nations were the biggest sellers of Gold till 2008?

    Why RBI is not selling their Gold bought (200 ton) in 2009 at record profit to bridge current account deficit?

    Why US hold 8000+ Ton Gold?

    What is the similarity between Greece, Portugal, Spain & Italy other then their debt problem?

    Why BRICS nation try to create new currency & their clearing bank?

    What happen to gold in 1933 & 1971?

    Why Gold crashed in 1980?

    If one search for above answer & connect the dots one may not surprise at why the Gold price rise since 2000.

  5. Still Gold remains the only currency that has survived for ages. Gold must not be looked upon as an investment, but ‘cash’. Also, returns from gold are remarkable when all other returns (from stocks, bonds, commodities etc.) are fake. And we are living in a world of fake returns (created by mindless printing of paper currencies).

    So I believe it’s important to have some Gold in one’s portfolio. However, it’s dangerous to speculate on Gold prices, like it’s dangerous to speculate on anything. Regards, Vishal (Safal Niveshak)

  6. @pgd73 Are you pointing to the fall of US Dollar as international currency at the same time rise of gold as international currency ?
    Do you mean that after fall of Euro and US Dollar; Gold will increase in its value?

  7. @Sanjay

    In a broader sens yes. it’s a very vast subject & can’t discuss in few pages.

    Now don’t say Gold will increase in value. Actually Gold is always try to maintain it’s value. It is paper currency that looses it’s value while Gold is retaining it’s value.So here we are not discussing earning from gold but protecting our purchasing power for future use.

    For earning better return Equity is the best asset class.

    We are slowly approaching hyper inflationary scenario worldwide. I don’t know how stocks will perform under such situation. If one put their money in FD or other debt instrument he will be sure looser. So if history is any guide Gold is the best instrument. Even RE & Farm land too is useful for HNI but they are relatively illiquid,

  8. The only reason to buy Gold is because it has given hardly any return in the last 30 years or max equal to inflation. Its always good to have an asset class giving no return to diversify..


  9. Hi Subra,
    In my opinion, the current rally in gold is more structurally driven owing to the way the currently financial system in the globe are trying to grab a pie of the gold reserves. The total amount of Gold mined till date is just over 165,000 tonnes and any excess demand hence shoots the price ! I became so much fan of the gold demand, that I wrote a complete article on it. You might want to read the detailed analysis at which is my attempt to explain the demand and supply economics currently working behind the gold prices.

    It would be interesting to hear your views on it.


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