Gold and silver prices up have been moving up consistently for the past two years on the back of spiralling inflation, rising crude prices, debt worries in Europe and the geopolitical tensions in the Middle East and north Africa. In the last one year, the price of gold has moved up by 30% and silver by 146%.
While investment demand remains strong in gold, the rise in silver prices is driven purely by industry demand. Analysts say that as long as the real interest rates remain negative, gold prices will continue to remain high and push up the demand for gold. A recent Reuters poll said that gold?s bull run will continue for the next four years and the median forecast of 12 analysts polled says the average price in 2015 would be $1,700 an ounce, from the current levels of $1,510 an ounce.
Indians have always preferred the yellow metal as a source of investment and consider it as a symbol of security. Currently, about 18,000 tonnes of gold are held by investors in the physical form, which accounts for nearly 11% of global stocks. Indians are also investing in the metal in the form of gold exchange traded funds. The total asset under management for 10 fund houses that have floated gold ETFs has gone up from R96 crore in March 2007 to R4,400 crore in March, 2011.
India is the largest gold market in the world. Data from the World Gold Council show that jewellery consumption, investment and industrial demand accounted for nearly 15% of total global demands in 2009 and, over the past decade, this has increased at an average rate of 13% per year. While most Indians prefer to hold the metal in the form of jewellery, making it the world?s largest gold jewellery market, data show that on an an annualised basis from 1990 to 2010, gold has given a return of 6.17% as compared with 8.84% in silver and 16.82% for the Sensex. As the data show, R100 invested in 1990 fetched R2,619 from the Sensex and R352 from gold at the end of 2010.