GOLD UNDER BEAR GRIP

After 12 years of positive gains, Gold prices are trading negative in 2013, already down 6% and 4% away from being called a bear market.The rhetoric, the sentiments and the speculation on duration of easy money in the markets is keeping the wealth commodity jittery. The recent positive economic data has led to rise in the dollar and also other asset classes like the equities. The reports released from biggies like Maquarie and Nomura have turned bearish on prices. Macquarie has revised 2013 price for gold to $1530 from $1668 forecasted earlier, while Nomura cut 2013 forecast to $1602 from $1981 per ounce, citing that the current environment has turned negative for investment in gold. Credit Suisse, Barclays BNP ParibasBSE 1.83 % are few more names in the long list of banks who have revised the gold average prices lower. The Big holders in ETF like Soros have cut their holdings by 55% in past quarter. But having said that not everything points towards to extended bearishness in prices. Most central banks have not only held onto their reserves but have been constantly increasing it too in gold.The India buying in 2013 till time has been higher compared to previous year, even as the Indian government has increased import duty to 6% , have introduced inflation linked bonds and other Gold linked products to discourage physical buyers and in the process lighten the current account deficit. The Chinese imports also have seen growth, the eagle gold coin sales in US have doubled year on year basis. So that tell you that while the Big boys are looking at the riskier assets, it perhaps is the smaller investors which are buying or hedging into the yellow metal.And then there are concerns on currency debasement, rising inflation, low interest rates in Europe and US. Gold prices have declined the most in the US currency, down by 6%. The appreciating rupee has cushioned the decline, sending the gold prices down by just 3%. The bullion has actually gained in JPY by near 4.5% and in pound sterling by 3%. Apart from a safe haven and an inflation hedge, gold also is a universal currency and indication of wealth, so even as the economies improve, along with that will improve the jewellery buying. So while you may miss on a strong rally in Gold, economists feel that gold still will give you inflation plus returns in the years to come.