Your 10gms of gold bought in Apr'11 is worth 35% more now!

All that glitters might not be gold, but the yellow metal is definitely shining brighter than ever before. Worries about European debt crisis haunted global stock markets for most part of FY12, making gold a safe haven buy for investors. From April-July 2011, it kept hovering in the range of Rs 23,480-24,000 per 10 gms.

In August 2011, the Standard & Poor’s downgraded US rating leading to weakness in the dollar index. This, coupled with Federal Reserve’s operational twist and depreciating Indian rupee spiked gold prices. It breached Rs 28,000 levels in that month. Also, inflation in August increased to 9.78% from 9.22% in July.

A strong rally in gold internationally till September added to the sentiment. From September to December 2011, international gold prices fell from a high of USD 1,923 per ounce to USD 1,594 per ounce. However, during the same period, domestic MCX futures hit a high of Rs 29,279. "This disconnect was mostly because of the slide in Indian rupee," T Gnanasekar of CommTrendz said.

The Indian rupee rose from 43.85 per USD in April to 53.45 per USD in November 2011, this was one of the key reasons rise in gold price from Rs 23,000 to Rs 29,000 in November, he added.

It hit a record high of Rs 29,970 per 10 gms in December 2011, for most part of the year till date and till date it remained in the range of Rs 27,000-29,000 per 10 gms.  Gold registered an annual rise of nearly 35% in FY12.

How does the way ahead looks like?

After a lifetime high seen last year, the question now is will investors have to shell out more to add gold to their portfolio? According to a report released by the CPM Group, gold prices are likely to remain high this year but they are unlikely to rise above the record levels reached in 2011.

Increasing supply versus a bigger global pool of investors for gold are combining to put a floor under the market, and prices are expected to remain firm, without the parabolic rallies of the recent past, the report adds.

However, T Gnanasekar of CommTrendz believes that rupee's movement against the dollar would be one key factor in determining gold price movements ahead.

He expects to see an upside movement in gold prices if rupee remains in the range of 50.25 - 51 per USD. Given this caveat, there are chances of gold hitting Rs 29,000 per 10 grams or higher by June 2012.

Kaushal Jaini of Dani Commodities expects gold price to be range bound between Rs 27,000-Rs 29,000 per 10 gms ahead. “Gold would be a value buy for investors if bought on declines to Rs 27,000-27,500 levels."

Despite soaring prices, China and India are expected to continue to buy gold in 2012 at the same levels seen in 2011, the CPM report adds.

Jaini also expects gold demand to remain stable ahead.

Here is a look at how gold shined in the past 10 years

India is the second largest consumer of gold in the world. Gold is believed to be most favourite investment option in India. Apart from its traditional importance, gold investments act as a shield against economic downturn and crisis situation.

Besides traditional options like purchasing jewellery or investing in gold bars and coins, plethora of new options are available like the National Spot Exchange, Gold ETFs and also Gold Fund of Funds.

Major global and domestic economic changes led to increase in gold demand. Over the past decade, gold demand in India has increased at an average rate of 13% per year. Gold prices have risen from Rs 5,000 per 10 gms a decade back to almost Rs 30,000 per 10 gms now, rising nearly 500%.