Bangalore: Investors are finding it difficult to speculate about the future prospects of gold. The gold prices have gone up to 29, 680 for 10 gram last year so there was an increase of 32.88 percent. The value of gold holdings in the gold exchange traded funds (ETF) have gone up to 10, 312 crore last year, according to the data given by Association of Mutual Funds in India (AMFI).

But now the situation has changed as the gold ETFs have seen a loss of 41 crore in May. Chirag Mehta, Fund Manager, Quantum AMC, told Economic Times, “Investors must look at gold from the portfolio diversification point of view. Gold prices should remain firm, considering the high deficits of governments across the world and the sovereign debt crisis.”

In India, the weak currency is working in favor of the precious metal. In June the gold was quoted at $1,571 for each ounce which is 3 percent less than the previous year. But the rupee price of gold has increased to 29, 680 which shows a gain of 28 percent because of the 26.19 percent fall in rupee value against dollar.

Depreciation in the value of rupee is the major reason why the gold prices have increased. Devendra Nevgi, Founder and Partner, Delta Global Partners, says, “If gold prices remain firm, demand for gold from India should go down. At the same time, strong gold prices should increase the supply of scrap gold, thereby influencing gold prices downwards,” as quoted by The Economic Times.