Fleeing Stocks for Gold

India – the world's hungriest Gold Market – is seeing a flight from equities into Gold...

DRIVEN BY STRONG GLOBAL TRENDS and a bearish domestic stock market, reports Commodity Online, Indian Gold Prices shot up to a new all-time record this week, breaking 13,650 Rupees per 10 grams.

   The previous record for investors in India – the world's hungriest market for Gold – was at Rs 13,560 per 10 grams on March 17th, the day Bear Stearns was rescued by J.P.Morgan and the US Federal Reserve.

   But for those investors worried about further falls in India's stock markets, Quantum Gold Fund in Mumbai has this piece of advice: Invest in Gold.

   According to the fund managers, investing in gold is a form of insurance for equity portfolios, helping to minimize loses.

   A historical analysis done by the Quantum Gold Fund shows that Indian stock markets have dramatically underperformed Gold nine times over the past 26 years. Gold gave positive returns and outperformed equities by a wide margin.

   Indian equity markets as of July 15, 2008 were down by 38% since the beginning of calendar year 2008. During the same period, gold in India is up by 29%.

   Previous jumps in the Indian Gold Price came in 1982, when the BSE Sensex gained 4% while gold gained 21%. In 1987 gold gained 22% while the Sensex underperformed at minus 16%.

   And in 2002, gold gained 24% as against Sensex gained just 4%.

   Investors today are literally running away from India's equity markets. Unabated selling by foreign institutional investors plunged the benchmark equity indices, BSE Sensex and Nifty, to fifty-month lows.

   Equity investors have been told to even sit with their cash intact. A wave of pessimism swept Dalal Street in the middle of July, with a steady flow of bad news and rumors weighing down the markets.

   Amidst this pessimism the Quantum Fund suggests investors invest a part of their portfolio in Gold and secure peace of mind.