In the last one year, Indian Gold ETFs in line with gold prices have given returns of negative 13 per cent. Given the poor returns, the question now is: Should we sell gold ETFs now? It's important to understand where international gold prices are headed because ultimately Indian Gold ETFs track international prices.

With gold prices plunging to three year lows, it may not be prudent so sell ETFs at such low rates. In fact, the investing mantra has always has been to buy on declines and sell on rallies and gold should not be an exception.

Moreover, most of the large fund houses and prominent investment banks across the globe have set spot gold prices target at around $1250-1400 an ounce, which is way higher then the current $1185 an ounce.

Also remember that gold has rallied in the last few years mainly because of poor economic conditions since the collapse of Lehman Brothers in 2008. Should for some reason a crisis in Europe re-surface gold would be back in vogue.

The precious metal has been a perfect hedge in bad times and at the moment good things are happening across the globe where economic data from US and Japan has been encouraging. This means that the natural asset class for investment would be equities at this point and not gold.

Where gold would head in the next one year would also depend on what the Fed would do with its quantitative easing programme. It has been injecting liquidity by making asset purchases each month, and lot of this money has found its way into gold. Should it decide to withdraw its stimulus would see gold heading lower and hence gold ETFs. On the other hand if worries over the Korean peninsula or Iran-Israel re-surface gold would head back to significantly higher levels.

At the moment it's difficult to predict what the Fed would do or what would happen across the globe.

In any case, it makes sense to stay invested and not sell in panic, which almost always results in losses and regrets.

GoodReturns.in