The time to get the best returns from gold investments or from your gold stock may no longer be available. Here's some points to ponder:

As per the data coming out of the World Gold Council Gold demand in the third quarter of 2011 reached 1,053.9 tonnes, an increase of 6% compared to the same period last year. According to the World Gold Council’s Gold Demand Trends report for Q3 2011 this increase was driven by investment demand which rose by 33% year-on-year to 468.1 tonnes, The demand for physical demand for the traditional purposes fell by 15% in this quarter.

Overall, Indian jewellery demand in Q3 saw a 26% decline in tonnage, when compared to the same quarter in 2010, to 125.3 tonnes.

Sandip Sabharwal raises the question that, for how long can investment demand hold up the price of a commodity in light of falling end user demand. The most drastic example of this was the way in which oil prices fell in the year 2008 from levels of USD 150 to USD 30 in a period of just six months. That is not to say that such a thing is possible and likely in the case of gold. Sandip Sabharwal predicts the end of the big gold run here. He says,

The probability that gold will yield much below what investors can earn via fixed deposits of banks in a country like India where 5 year deposits of the safest of banks yield near 10% is extremely high at this stage.

As gold prices start to first stagnate and then fall, there will not only be low incremental flows into gold linked investment products but there will also be outflows. A large number of Hedge funds that have built up significant long positions in gold might also go short as the trend reverses. Given the fact that the supply of gold continues to be strong this will ultimately lead to a period where there could be a sharp sell off in gold. The only saviours for gold at this stage are the Central Banks that continue to buy with the trend. As price correct even they will move out and further accelerate the correction.

Contrary to views of gold prices moving to USD 2500 etc. my view at this stage would be for a correction in prices by atleast 20-25% over the next one year.

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