Maybe, it is not glittering but its still gold

Once upon a time, there was a bright golden metal. Every time there used to be an economic turmoil in the world; investors would flock to this golden lump, earning it the name of a safe-haven investment. There was a lot of optimism about it, markets were positive it would cross the $2,000 per ounce level by 2012 and the bulls were riding on this golden spree. However, come 2012, especially recent months, and the precious metal appears to be losing its lustre. Investors are worried. Has the safe haven been denuded of its glorious status to a riskier class? While one cannot boldly testify to that, cautions have started surfacing about investing in gold. Where has the lustre gone? It appears the eurozone economic worries seem to have tarnished some of the sheen. This may appear puzzling at first since previously any glitches in either the European or American economies would have had investors run for gold. However, deteriorating eurozone prospects have had investors more worried than usual, making them turn to the safety of the dollar. Gold, consequently, struggled to attract investors, making it behave more like riskier assets. A sharp weekly slump in gold prices was also seen earlier in March when the US Fed Chairman, Ben Bernanke, did not hint at any prospective easing and a possible QE3 in the US, which had largely been expected by the markets. This stance of the Fed Chairman not only lent some hope about the US economy, but also put some downward pressure on gold prices. Some analysts also claim that gold had gotten way ahead of fundamentals and a correction may be in order. "A lot of interest in gold over the past year has been speculative. It had been due to concerns about political paralysis on both sides of the Atlantic," Brian Gendreau, market strategist with Cetera Financial Group - a financial advisory and brokerage group based in Los Angeles - was quoted by the CNN on Monday. At the same time, the recent slump in gold prices - the metal has lost over 3 percent for the third time this year - may also spur some investors to liquidate their positions and revert to the cash is king mantra, especially at a time when prices of other commodities have also been receding. Besides the telltales of investors changing preferences, the absence of physical buying of gold from India, usually a large gold consumer has also had a negative impact in the gold market this year. "Indian imports of gold in April plunged to a third of what they were a year before," wrote the Financial Times last week. Sky-high gold prices, as well as the Indian finance ministers proposal to increase excise duty on gold imports and unbranded jewellery earlier in April affected gold trade in Indian markets. Yet, becoming all bearish on the gold market may not be a wise idea either. The pulling back in gold prices and the Indian governments decision to revert from the decision of imposing excise duty on gold is believed to be helping rebuild optimism about gold trade in India. At the same time, recent US economic data has been disappointing and points towards an anaemic recovery, meaning thereby that the dollars recently-hijacked safe-haven feature may go back towards gold. "Despite its recent pullback, which has brought into question golds status as the currency of last resort, we believe that the case for higher gold prices remains in place," the Financial Times quoted Jeffrey Currie at Goldman Sachs. Overall, while a gold price rally seems highly unlikely to be in order this year, an alarming correction in gold prices doesn appear to be happening either.