Personal Finance Blog India –

Two IMP Reasons Of Fall In Gold Prices:

Gold Prices have witnessed sharp bloodbath within last few days.Prices corrected sharply after important developments in US & European countries.In India also prices sharply come down from level of 29300 to the level of 26,800 within few sessions.

Today we will look at the important reasons of correction in Gold prices:

  1. Last week,Federal Reserve of America indicates the winding up of the Quantitative easing programme & Gold have indirect relationship with printing of currency so it was inevitable for Gold to react sharply.
  2. One may aware about developments in the European countries like Cyprus where banks & whole economy is in big trouble.There was a news that such European countries like Cyprus can sell Gold to raise the capital & it has impacted Gold prices sharply.

Whether its Equity or its Gold always runs on speculation & emotions.Today both equity & Gold have weak sentiments.Both of them have their won reasons for weakness.

Any asset can not give investors double digit returns decade after decade & healthy correction is always needed for step ahead.

Bearish & Bullish cycles will follow in future also & investments made in bearish phase should reward investors in future.

Factors Affecting Gold ETFs:

Gold Exchange Traded Funds (ETFs) are popular among investors as transactions are very much easy.But their certain factors which we should keep in mind while investing in Gold ETFs.

We will categorize them as Fundamental factors & Technical factors.

Fundamental Factors Affecting Gold ETFs:

The fundamental attrributes which affects prices of Gold have direct impacts on Gold ETFs as well .Some important fundamental factors which can influence Gold prices are as follows:

  1. Global Demand & Supply:Demand / Supply of Gold which is influenced by factors like forward selling by Gold producers,Central Bank purchases,Sales , Production,Cost levels in major Gold producing countries like South Africa,United States,Australia.
  2. Currency Exchange Rates:Today Dollar : Rupee currency exchange rate is 54.30.If suppose this rate go down @50 then Gold will available in cheaper rate & vice versa if currency exchange rate goes above to 58. …..Also View: How Gold & Silver Prices are calculated In India.
  3. Inflation rates & investors expectations in future.
  4. Interest Rates.
  5. Trading activities by big hedge funds & commodity funds.
  6. Global regional,political,economical,Financial events & crisis.

Also Read: Factors Affecting Commodity Prices.

Technical Factors Affecting Gold ETFs:

  1. The Gold underlying the Gold ETfs may be subject to loss,theft,damage though enough precautions are always taken by the issuers.
  2. The best prices quoted in the market are for small transactions only.Big transactions may have to be executed  less prices…this additional cost risk which is known as “Impact Cost Risk” can affect the Gold ETfs.
  3. Liquidity Risk:Absence of adequate liquidity of Gold ETFs may impact the transactions in Gold ETFs.
  4. Taxation:Changes in taxation structure like changes in import duties,sales tax,VAT,can affect the gold valuation & will directly affect the Gold ETF prices.

Also Read:

Illustration Of Reliance My Gold Plan & How It Works:

Reliance My Gold Plan offers buying of Gold on daily basis.This plan claims to buy gold daily basis in equal tranche for 20 days & so its efficient way of buying Gold & it will avoid concentrated purchase of Gold.

Reliance My Gold Plan have provided the illustration of How this plan works & we have reproduced it for the readers of this blog.Remember that quantity of the Gold buying will depend upon the price of Gold on the specific day & it will be declared on official website of Reliance My Gold Plan.

Administration Charges of 1.5% will be added in daily Gold price & according with that price only Gold allotment will take place.

Illustration Of Reliance My Gold Plan:

Consider Monthly Subscription – Rs.2000/-.

SO Gold of Rs.100/- per day will be for next 20 days as per prevailing rates:

Date Subscription Daily Subscription Amount Gold Price – Per Gram Gold Price After adding administration Charges Gold Grams Alloted Cumulative Gold Grams Added
24/05/2012 Subscription amount Of Rs.2000/- realized in account of Reliance My Gold Plan
Rs.2000/- will be divided in 20 equal parts & Gold of daily Rs.100/- will be purchased for next 20 days.This cycle will be reiterated when next installment of Rs.2000/- will be received.
25/05/2012 Daily Avg.-1/20 100. 3057.68 3103.55 0.0322 0.0322
28/05 2/20 100 3075.16 3121.29 0.0320 0.0642
29/05 3/20 100 3090.52 3136.88 0.0318 0.0960
30/05 4/20 100 3072.19 3118.28 0.0320 0.1280
31/05 5/20 100 3098.67 3145.15 0.0317 0.1597
01/06 6/20 100 3086.81 3133.11 0.0319 0.1916
04/06 7/20 100 3190.32 3238.17 0.0308 0.2224
05/06 8/20 100 3242.75 3291.40 0.0303 0.2527
06/06 9/20 100 3255.47 3304.30 0.0302 0.2829
07/06 10/20 100 3200.38 3248.39 0.0307 0.3136
08/06 11/20 100 3125.16 3172.04 0.0315 0.3451
11/06 12/20 100 3171.78 3219.35 0.0310 0.3761
12/06 13/20 100 3191.90 3239.78 0.0308 0.4069
13/06 14/20 100 3216.27 3264.51 0.0306 0.4375
14/06 15/20 100 3226.86 3275.27 0.0305 0.4680
15/06 16/20 100 3230.04 3278.49 0.0305 0.4985
18/06 17/20 100 3223.69 3272.04 0.0305 0.5290
19/06 18/20 100 3256.53 3305.37 0.0302 0.5592
20/06 19/20 100 3243.81 3292.47 0.0303 0.5895
21/06 20/20 100 3202.51 3250.54 0.0307 0.6202

One can check that when their is deep in prices ,more amount of Gold is purchased & vice versa when prices are at higher level.

This plan offer more advantage in the cases of correction in Gold prices.

Our Take on Reliance My Gold Plan:

First important thing is that you are investing in Physical Gold not in paper format.So output of Gold will be in the form of Gold Coin / Jewellery. Physical Gold is considered as illiquid asset [though we can mortgage it].

Just remember that where there is volatility ,systematic investment is always useful.We can not call recurring deposits as systematic investment as its a linear straight line.Whether Equity or Commodities both always revolve in the cyclic phases-Bullish & bearish.So suppose even if Gold went multi year bearish mood from now,I believe that it will follow bullish phase thereafter. So if you have chosen to invest, you should be enough consistent in investing.

Finally , IDBI Trusteeship Services limited are Trustees of this plan & completely filled applications alongwith the required documents can be submitted at offices of CAMS.

Also View: Details Of Reliance My Gold Plan

Disclaimer – Blog author is distributor of Reliance My Gold Plan.

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