Gold price is at Rs.1994.8 per gram

Gold price has been at Rs.1994.8 per gram for past 4 days, just short of Rs.2000 per gram.

However the Indian currency Rupee has strengthened during last 4 days ( due to large Coal India IPO which is bringing in a lot of foreign money rising the demand for Rupee thus strengthening this currency). Due to this strengthening of Rupee, further price increases in Gold measured in Rupees is getting hit or suppressed. Hence only if Rupee weakens after few days or few weeks because of noisy demand from exporters (Infosys, leading IT exporter is already crying that the strengthening of Rupee is hitting its profits and saying that strong Rupee will kill exports). We will continue to hear more such noise from exporters.

Like I have written before, every time Rupee strengthens, the exporters like Technology companies and Textile companies will start crying and make noises. Immediately the Reserve Bank of India will intervene and weaken the Rupee again. This cycling will continue.

So one point is clear. Rupee or for that matter no Asian Currency will strengthen. All Asian governments have only task, weaken their respective currencies and encourage exports to save jobs.

So given this fact, there is only one way route for Gold to go up and up.

September gold import soars 30 pc to 34.8 tonne - The Economic Times

September gold import soars 30 pc to 34.8 tonne - The Economic Times

Gold ETF collections up 90 pc to 12.87T in Sept - The Economic Times

Gold ETF collections up 90 pc to 12.87T in Sept - The Economic Times

Gold price crosses Rs.1950 per gram

Gold price which was hovering just above Rs.1900 per gram for last 4 weeks, has made a big upward move on a single day Wednesday Oct 6th, to cross Rs.1950 per gram.

With the 9 day Navratri or Dasara or Dussehra festival starting this Friday Oct 8th, and with Diwali or Deepavali the festival of lights on Nov 5th early next month, Gold price has every reason to cross record Rs.2000 per gram very soon. Just 6 years back Gold price was Rs.500 per gram, now it is about to touch record Rs.2000 per gram very soon.

As written in my earlier article below, with all major Asian countries deciding to devalue their currencies to encourage exports, with paper money reducing in value - There is only one way for Gold price -> Go Up.

By the way after the Diwali festival ends on Nov 6th, immediately on next day Nov7th the Karthika Masam (auspicious Hindu month in Hindu calender particularly in South India) starts. The Karthika Masam will last until Dec 5th, and is an important Hindu marriage season.

With important festivals and marriage season back to back.....Gold Price looks set to go way up in coming weeks.

Why will Gold price keep increasing?

Gold prices have been increasing since last 5 years from Rs.450 per gram in 2004 to now at Rs.1910 per gram in 2010. As we see Gold prices have quadrupled or multiplied 4 times in 6 years. Recently wee see Media reports in Indian newspapers that high gold prices is discouraging buyers in India and Indian people are buying less Gold Jewelery than before because of high prices.

The value of Indian Rupee is pegged to US dollar between Rs.44 to Rs.50. The Government and RBI (Reserve Bank of India) will never allow the value of Indian Rupee to increase against US Dollar. Today India is highly dependent on exports particularly IT exports, therefore it makes absolute sense for Government to maintain the value of Indian Rupee competitive against the US dollar, so that India will continue to get more business in IT and other export sectors. This will most importantly create jobs for more people and also more job opportunities due to strong exports. Therefore it is in interest of maintaining a strong job market, the government has to maintain the Indian Rupee competitive, that is not allow the Rupee to increase in value!

This is the same strategy other Asian countries like Japan, China and United Arab Emirates etc follow to increase exports and create more job opportunities.

Therefore since no major Asian country wants to allow their currencies to increase in value, Gold price will only go up. Since Gold price will increase when value of paper currencies keep falling.

Gold price moves opposite to value of paper currency.

Investing in Gold related companies

With Gold prices going up, the equity share prices of Gold mining, exploration and Gold refinery companies are increasing even faster. Therefore if you firmly believe that Gold prices will only keep going up in the future (historically Gold has been the best form of money since ancient times) , than it makes very good sense to be investing in Gold mining, exploration and Gold refinery companies.

Most of the the Gold related companies are based in Canada, Australia, South Africa, United States, China, Mexico and many other countries around the world. Some are owned by governments of these various countries, some are privately held firms and there are some companies which are listed in various stock exchanges around the world.

Given this geographic fragmentation of Gold mining and refinery companies. As an individual investor the best way to invest in Gold mining and refinery companies around the world is to invest in reputed Mutual Funds which manage a good portfolio of Gold mining, exploration and Gold refining stocks spread across the world.

For investors in India, I would suggest DSP BlackRock World Gold Fund, which invests mainly in BlackRock World Gold Fund which in turn invests in Gold mining, exploration companies spread around the world. Here is link to DSP BlackRock World Gold Fund page.

Some advantages of investing in a Mutual Fund which is primarily focused on Gold related companies are

• No entry fee ( for regular equity diversified Mutual Fund there is a entry load of few percentage points).
• If invested for more then 12 months, then no exit load ( again for regular equity diversified Mutual Fund there is a exit load of few percentage points)

What more can you ask for

1. Gold is only asset which is guaranteed to keep going up in value ( history is proof).
2. Since Gold mining companies are not fashionable like technology companies (Apple, Nokia) or Big Brands ( Colgate, ICICI Bank) the media has not noticed them. However the technology companies and big brands cannot always go up and will fall when other competitors come out with newer products and services.
3. However Gold value will only go up, so whichever company mines, explores and refines Gold from different corners of earth will always have great value and this value will only increase, since Gold price will only increase.
4. Plus it is very cheap to invest in Gold mining related Mutual Funds, since these funds have no entry load and also no exit load (if invested more than 12 months).

Gold price moves above Rs.1920

Gold moves above Rs.1920 per gram. However this is still lower then the levels Gold can reach.

With Festivals like Dasera, Deepavali and marriage season starting in coming weeks, it will be interesting to see demand for Gold in India.