Today my batch mate put up a query :"Why the gold prices are going up when the Stocks are also high".
Following is my reply.
I’m actually flattered that someone asked me something except why the M/E scavenge temp is going up.
About the gold ? Well.. ahem!!!
Is it actually linked with stock prices??
It’s never been.
1. Being a scarce commodity , it’s price is only linked to one thing – DEMAND.
2. This demand can come from:
a) Consumer demand like India for festival season.
b) Investor demand like bullion.
c) Shifting of investment avenues from World currencies to commodity.
d) This can happen in case of war- like it happened during Iran –Iraq war, Kuwait occupation etc.
e) Economic uncertainties like at present.
f) If you earned in a particular currency and did not have faith in it like US or EURO- then where will you keep it- obviously in a mode which is reliable, current and is small to hold- you have gold and platinum is catching up.
Just out of the context but if you are earning in USD it makes sense to keep about 5% of yr savings in GOLD ETFs. This mode will help it stay in gold form and not be converted to jewellery ( when you are not watching).
I am also certain that Silver and platinum are also to be held but I do not know how I can take delivery of it in cash and hold on to it till I want.
So you see it is back to MFs.
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