A few people have asked me…’should I increase my SIP in gold’.

Frankly¬† for me the answer is ‘I do not know’.

However I realise that many of them are sitting on small losses or a very poor return if they have invested in the last 10-12 months.

The Rupee not long ago was 40 is now at 60. That is not good news for FRESH imports of gold, the currency has already acted like an import duty.

Then there is import duty and the cost of getting it to the shop.

Take the other side of what is happening in the Indian economy. Big job losses like the Insurance sector, Retail, banking, is not a great scenario. All this does not augur well for the Indian consumption to go up. And please do remember India is growing slower than 6.5% rate…All this is likely to put pressure on the gold prices – DOWNWARD.

Gold will go up at a rate slightly¬† higher than inflation. International scenario is different, but if India and China are not net importers -that too in a big way, gold can come down…

So I may not say sell, but I will surely not say buy.

Please remember in business / metal cycles SIP will not work. Not work at all. God bless you.

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  1. india has been an net importer of gold since ages.no wonder the firangis called india as a gold -sink.
    we consume 22% of the gold int the world every year.so a dip of 1 or 2% in the amount is not going to change much.
    at the same time equities have been hammered worse.
    equities are a smart bet in general since it is a bet on human ingenuity -but looks like it is more and more dependent not on good management/business models or prudent shareholders,but on central bank liquidity,govt regulatory capture or plain corruption.so there is no straight answer.

  2. Can you please explain the statement: “Please remember in business / metal cycles SIP will not work”?

    Is it because the business/metal cycles are of too long a duration?

  3. Subra,
    Few conflicting statements in your post above…
    On one hand you say that gold prices are pressured downward, and on another line you say gold will go up slightly higher than inflation. Does this mean that inflation will go down in next few years? I don’t think that’s possible. Based on what I know with the WPI and CPI data for the last 24 months, inflation is now firmly entrenched in the economy. CPI inflation in double digits is here to stay for atleast another year. In such situations, even if dollar prices of gold go down, the rupee *WILL* further depreciate against dollar, thereby giving gold its upward bias.

  4. Sanjay Singhaniya

    “Please remember in business / metal cycles SIP will not work. Not work at all. God bless you.”

    Subra sir,
    Can I extend the logic to metal producing companies? Can I say that SIP in equity of steel making companies wont work.

    Looking forward to more insights.

  5. Sir..In India…only few people are buying gold genuinely . Its the black money which is used by people to purchase gold and India still generating crore and crore’s of black money..which they can put either in gold or in property safely. Hence IMHO gold demand in India will never going to go down sooner(at least till some really honest govt come , which is still a long dream).

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