Gold prices are in a free fall with the global demand for the yellow metal slumping to its lowest in nearly five years. But the Indian love affair with gold continues. Here are some points that investors can consider while taking a call on the yellow metal:

Slide to boost gold buys

The continuing slide in prices will result in higher gold consumption, say experts. “The fall in gold prices has brought consumers back into the market. This (fall) is turning out to be a good buying opportunity,” says Keyur Shah, CEO (precious metals business), Muthoot Pappachan Group. C P Krishnan, whole-time director, Geojit Comtrade, says, “Lower gold prices have attracted retail buyers. The demand during Dhanteras was also good. The festive season demand would also be better.” While gold buying is traditionally subdued in Q3, the demand is usually high during the festival season (Q4 – October- December).

Worst may not be over

The sharp slump in prices may have led buyers to accumulate more gold. But the worst is still not over for the yellow metal, says advisers. “The outlook is not very positive and gold is not an attractive option in the short to medium term,” say financial planners. According to Krishnan, “Gold is still looking bearish because of the strong dollar. There is no support for gold and there is scope for further fall in prices.”

Beware of regulatory action

The sharp increase in gold consumption in Q3 is largely due to the relaxation of gold import rules by the Reserve Bank of India (RBI), say experts. The RBI had introduced the 80:20 scheme in August last year, allowing nominated agencies to import gold on the condition that 20% of these imports should be exported. “The demand was much lower last year because of RBI restrictions,” Shah says. The clampdown on gold was done to halt a free fall in the rupee, which slumped due to the high CAD (current account deficit) that arose due to surging imports of the yellow metal. The central bank relaxed gold import norms only in May this year. Any unusual increase in imports is likely to attract regulatory action. “The government is also wary about the increase in gold imports. Recycling gold is the only solution to meet demand in the long run,” say experts.

Take a long-term view

Buyers should take a long-term view – at least three years – on gold, say advisers. “Gold is a time-tested asset class. The price volatility is temporary and so investors should take a longterm view on gold,” Shah says.