Is it a good opportunity for investors to consider investing in gold?

The yellow metal has touched a five-year low of $1,090 down 42% from its all-time high of $1,900 in 2011


The low price of an asset class is not the only factor that determines or should determine an investment call. Investments are made in assets where the appreciation is expected to be higher.

Right now, there are no fundamental factors that suggest the possibility of a price rally in gold over the next year or so. The interest rate hike in the US is going to be implemented as planned. History has shown us that gold typically corrects when the US hikes its interest rates.

Right now, there is nothing to be worried about as far as the global economy is concerned, except for China. Gold is trading at $1,000 levels and has corrected since its peak. So, going ahead, the fall might probably slow down a bit. However, by mid-2016, gold prices could trade in the $900-$950 range. Unless we see another asset bubble being created, the precious metal is likely to be under pressure.



There are two perspectives to be considered here. One is the short-term perspective and from this point of view, gold seems out of fashion. From a six month-to-a year perspective, it is a dead investment; there is no point in allocating any funds in gold.

But over a three- to five-year horizon, gold can rebound very strongly as the picture is not yet rosy if you look at the overall economic landscape. Although issues coming to the surface in Greece and China have been addressed for now, the dust has not yet settled. Over the next three years, some kind of uncertainty will again creep into the markets.

Over the coming six to 12 months, there is a probability of the US hiking interest rates at least once, if not twice. This will keep the bulls on the back foot. So, in the short term, it doesn’t make sense to invest in gold, but from a long-term view, gold will glitter. 



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