Current state of gold and Indian Rupee
From last few days,
Indian rupee and gold prices are in limelight. Yesterday, the rupee had made record
low of 59.9850 to the dollar. The sliding of rupee reflects the stress state of
Indian domestic economy. The currency has lost 11% since May. Our economy is
facing challenges like high current account deficit and lower capital flows.
The major impact of this sliding of rupee to dollar can affect the credit
rating of India. At present, S&P has already maintains negative outlook
whereas Fitch and Moody has maintain stable outlook for India.
Sliding rupee will impact
on our industry significantly. Software and pharma industries will boost their
profit as their major revenue depend on export. Automobile, capital goods and
telecom sectors will feel some pinch on their profit margin.
Gold has also gone low 5
% yesterday after US Federal Reserve signalling of possible scale back in
stimulus. I always consider gold as a hedge instrument against inflation. It is
non yield bearing asset. In US 10 year treasuries
bond is in 2 year’s high so investor have attractive option of invest in bond. With
bond yield rising we are beginning to see liquidation out of gold. Spot gold
has also touched the lower level since October 2010.
Demand of gold in India has
slowed in this week due to government’s curb on import of gold. According to
many technical analyst it may be fall below 1200$ an ounce. In this year, it
has already come down 23%. We will witness the huge volatility due to trading
community in gold. Today morning, many of buyers of gold is attracting for
purchase due to its fallen price. This sentiment may give some support to its
price.
The overall impact of weak
rupee will be seen as hike in fuel prices, expensive foreign education, costly
vehicles and electronic items. The attraction for gold of Indians will be
continued as it is well known fact.
For more detail about any other query related investment,
you can contact me through my email.
Regards,
Arvind Trivedi
Certified Financial Planner
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