Study on Gold

• if we go back in the history, in the year 1976-81, gold had a dream bull run. From $100 per ounce in 1976, it had gone as high as $850 per ounce.  

 

•  That rise took place as people feared that US economy would collapse and $ would have no value. 

• That time, US was in war with Vietnam & then came Iranian Revolution – inflation in US was at very high levels and in a way, there was hyper-inflation.

Pessimist's side of the story :

Once the war was over and inflation eased out, Gold came crashing down. In the year 1990, it was $400 per ounce and in the year 2000, it was close to $250 per ounce. That means the effect of bubble was so big that even in 20 years, the gold could not recover its original price and was languishing at less than 1/3 of its peak price. So please don’t be surprised if you will be able to buy gold again at levels of Rs 10000-12000.

Gold was Rs.1450/- in the year 1980 and today it is Rs.18800/-. The rise of 13 times in last 30 years @ 9% p.a. But 5½ times of such rise is on account for Rupee depreciation in terms of dollar. So if we were to analyse the rise in gold price in relation to rupee alone without taking dollar factor, it is only 2.35 times. You see, even in terms of dollar, gold has risen only 1.5 times in last 30 years.