Article;
Time to focus back on gold and silver.
Comment;
Gold is in demand because it is a safe-haven investment
asset, which means its demand increases when other instruments are not
performing well in terms of returns… but, that does not mean that it is dumb in
other seasons... Buy and selling of gold goes uninhibitedly in the market… Gold
is also in demand because of protection against inflation... Combining the
above two from a value perspective we get the conclusion that inflation is high
during booms so gold gives low real-returns, nominal prices minus inflation...
its value in terms of quantity of purchasing... its purchasing power...
decreases… but, nominal prices increase, therefore it is wise to sell gold,
also to pay for expenses because of high inflation... But, during a
slowdown when demand, inflation and prices are low but, again, real
return is high, it makes more sense to buy/invest (in) gold because it is cheap... Moreover,
monetary-policy is also responsible for changes in the price of gold… when demand
and inflation is too high the central-bank increases interest-rate which also
brings the demand and price of gold down and vice-versa… All prices in the
economy move in the same direction, therefore when we expect demand and prices
of other things to go up we can also expect the same for gold prices… Therefore,
during booms it is good to sell gold and in busts it is good to accumulate gold.
Other-things also work on the same principle… we buy when prices are low and
sell when prices are high… Let us wait for some more time for action from the
Reserve bank to reduce demand and inflation which will bring the price of gold
down, too. Demand for gold will go up… due to recession and lack of good
investment opportunities, also… Same for silver, too…
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