Gold prices are one area where I have been fantastically wrong; I’ve written twice about how I have stayed away from gold, and gold price movement during that time has shown how wrong I have been.
Kartavi left a comment the other day which illustrates this very well. Here is the comment.
You have posted on the topic â€˜opinion on goldâ€™, twice (March-09 and on October-10).
I think its time to review the opinion again. Please review in terms of indian rupee (and not USD) since whenever gold had come down (in USD) it has not down in INR due to Value of the rupee against USD. â€œAare bhai, bahar ki duniya me sona gire ya chadeâ€¦ apne yanha to badhta hi haiâ€¦to chhote INVESTER ko kya karna chahia ?â€
Here are the two posts about this:
As a follow up, I would say that you shouldn’t seek my opinion on this because I have been so wrong on this already, and I don’t have much by the way of opinion also because my position on this is unchanged.
When something gets as popular as gold has for the last few years, it is natural for it to get the attention that it’s getting and more and more people flocking to it. Eventually, everything that grows disproportionately comes down as well, and in gold’s case I feel it is disproportionate but I have been proved wrong so far.
Kartavi makes a very good point of gold returns in INR and how the USD – INR price movement has impacted the price of gold. When you buy any asset that’s priced in a currency other than the INR, currency price movements make a difference and this is easy to understand with things like the Motilal Oswal NASDAQ ETF which rose a lot more than its underlying index NASDAQ due to Rupee depreciation, but I think it wasn’t very clear how big of a difference exchange rates make to gold prices before the movements of the last two years. But now it is quite clear that if the Rupee were to appreciate for some reason, gold will go down, by how much, no one knows. So, in taking a position on gold, you’re really taking two positions, one on USD-INR and the second on gold prices.