Thread by @PranArora9

Tweet-Storm - Investing in Gold -a long bet -2025

1/1 Do you know that in August 2011,international gold-price was US $ 1948.And US $ vs rupee was at Rs 44.73

Due to above , in 2011, domestic gold-price for 10 gm(Tola ) price was Rs 30745 (One ounce contains 28.34 gms )

1/2 Today international gold-price is US $ 1290 and domestic gold-price per 10 gram in Indian rupees is Rs 32090 .

So although international gold-price came down by 33% in last 8 years ( from 1948 to 1290 ) , domestic gold-price has remained same due to rupee depreciation.

1/3 Now if one has to take a long call ,let's say upto 2025 (as asset cycles happen to be of very long duration) .Either we can assume that there won't be any change in prices or we should be looking at it from different angles ! Here’re few scenarios to ponder upon :

1/4 Scenario 1 : Moderately bullish

Imagine international gold-price moves back to US $ 1948 in next 8 years and INR does not further depreciate ... so gold price in INR would be be RS 48500 per 10 gram. A gain of > 50% in next 8 years. (not so attractive return per annum )

1/5 Scenario 2 : Bullish
If int. gold-price goes up to old levels of US$ 1948/ounce & rupee also gets depreciated by 5% per annum in next 8 years,it would be touching 104/US$ . In this case, gold would be Rs 71500/10 gms.A gain of >100% in next 8 years.(decent per annum return)

1/6 Scenario 3 :Pessimistic

If international gold-price remains same but rupee depreciates by 5% , the gold-price per 10 gms would be Rs 47 400 . A gain of > 50% in next 8 years (not so decent return per annum)

1/7 Scenario 4 : Highly Bullish
Imagine international gold-price crosses its last peak of US $1948 per ounce & touches US$ 3000/ounce in next 8 years .And rupee also gets depreciated by 5% per annum.The gold price would be Rs 1,10,000/10 gms. A gain of 258%. (very attractive)

1/8 Scenario 5 : Highly pessimistic
Neither gold moves anywhere nor US$ inches in any direction . How to play in this case ! Don’t worry , you would get the answer if you continue reading.

1/9 How to play ?
Opt 1 : Buy physical gold
Opt 2 : Buy Gold ETFs
Opt 3 :Play via equity (investing in companies who provide gold loans)
Option 1 & 2 are very simple although Opt 2 is more safer as one doesn't want to lose sleep over the safety of keeping gold in physical form.

1/10 But Opt 3 happens to be more attractive . Let’s look at the choices for an Indian investor as far as gold-loan companies are concerned.
Choice 1 Mannapuram Finance
Choice 2 Muthoot Finance

1/11 Both are trading at a reasonable PE levels, both having a decent and consistent growth , both having a dividend yield between 1-2% . If he gold price goes up, AUM for both the companies would grow on the same lines thus expected to improve the performance of these stock

1/12 In case of worst case scenario mentioned above where gold-price does not go anywhere in next 8 years, both of these companies still have capability to give 10% return per annum.
If one has to choose from one of the above , here are few more facts:

1/13 a)Promoter holding in Manna much lower as compared to Muthoot Finance .There’re always rumors in the market that due to lower promoter holding, Mana can be acquired any day by some big player.Can be +ve/-ve in the long run depending upon market scenario and the deal.

1/14 b) Muthoot Finance stock had a subdued performance during 2017 bull run whereas Manapuram had already run a lot although from valuation point these are almost at par

1/15 Beauty of investing in this way has few advantages :
i) Playing for future gold upside movement
ii) A hedge against rupee depreciation
iii) Investing in one or two of the well established gold-loan companies.

1/16 Disclaimer 1 : These are my personal views ,am not a SEBI registered advisor
Disclaimer 2:Investing in stock market can be highly risky, so please do your own due diligence.

1/17 Would love to hear your opinions. Thanks in advance.

1/18 If you wanna read more about international gold price prediction, here's a renowned expert , follow this thread, His prediction is US $ 5000 /ounce in 2025. 😙

https://twitter.com/LibertyBlitz/status/1081278343784259584

This was the first year since 2012 that total gold-backed ETF holdings finished above $100 billion, at $100.6 billion, according to the World Gold Council."
mobile.reuters.com/article/amp/id…

Interest rates in mega economies are the lowest they’ve been in hundredsof years. And central banks(Fed etc.) can barely raise them without blowing apart many economies around the world , what does this mean?

Only question you should be asking yourself right now.

Bank analysts raise 12-month price forecast to $1,425 an ounce.

Gold and silver are ‘‘looking good in 2019,’’ underlining a potentially positive indicators that ‘‘should drive related equities as well”

bloomberg.com/amp/news/artic…