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Trading Technique in Falling Gold Prices Scenario

We as Indians have an affinity towards gold as we inherit it through generations and assume it as an asset which will help us in case of an eventuality like we raised gold loan to buy property and later were able to reclaim the gold after payment of the loan. Thus gold do come handy in such scenarios as we found that nobody was ready to offer us loan against the diamond jewelery though priced much higher.

The present scenario suggests that gold is going to remain weak as US Fed is likely to raise interest rates in the month of Sep 2015. As per our analysis; any increase in US interest rates should further strengthen the dollar, prompting more fund outflows from commodities, metals and emerging-market assets.

The dollar hit its highest level in three months against a basket of other major currencies on Tuesday amid expectations for a rise in U.S. interest rates from near-zero levels in the coming months. The History repeats itself and below data will substantiate our claims that with US Fed rate hike and dollar peaking against major currencies money will move out of the gold.

This is exemplified by gold’s bull market in the 1970s. From 1971 through 1974, the Fed funds rate went from roughly 5 percent to 10 percent, during which time the price of gold rose from $35 per ounce to roughly $200 per ounce. The Fed funds rate fell back to 5 percent by 1975 as the price of gold fell by nearly 50 percent. The Fed funds rate soared from 1977, peaking at more than 20 percent in 1980, and during that time frame, gold reached a peak of $850 per ounce.

However we Indians can use this situation to our advantage as we can buy gold in form of jewelery and can appease our wife as ladies are best friend of gold and diamond's. We intend using this technique where we will buy gold with every Rs 1000 fall.

So, divide the capital equally as we see gold not breaking the psychological barrier and thus gold should find support at Rs 20000 mark if the downtrend continues. Thus divide capital in 5 parts which you want to use for gold and buy when it is at 25000+ level; 24000+;23000+ & so on. You can resell if it crosses the buy price with profit. Last year gold recovered from Rs 24000 level. However as a word of caution; the strategy will yield maximum results for an investor with a time horizon of two to three years.

You can even use the gold ETF route to buy gold if you do not physically want to hold the gold. Do read which is better i.e. gold ETF or physical gold as both has its pluses and minuses.  Also check out gold bees here.

However if gold is not your penchant; than consider equity route and none can beat our Jackpot tips which is our best intra day tip.

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