On Thursday, India Ratings said gold prices in the domestic market could lower in the range of Rs 25,500 per 10 gram to Rs 27,500 per 10 gram in FY15.
The expected decline in domestic gold prices takes cues from the likelihood of a decline in international gold prices to between $ 1,150 per ounce to $1,250 per ounce during FY15, from the current levels of $ 1,300 per ounce, adding that an economic recovery in the US and euro zone would strengthen the US dollar that has historically a negative correlation with gold.
This would further dampen from 2013 when gold prices fell nearly 28 per cent its sharpest annual fall in 12 years as the finance ministry and the RBI put in strict controls to check gold imports that were inflating the current account deficit.
Domestic traders also agreed and said gold prices would fall over the next few months as well as some relaxation in the import norms for the yellow metal.
There is a bearish sentiment in the market. I expect gold prices to touch about Rs 27,500 per 10 gram to Rs 28,000 per 10 gram this fiscal. There will not be much appreciation in prices but prices will not fall drastically, said Prithviraj Kothari, director, RiddiSiddhi Bullions Ltd.
Kothari, who is also the vice-president of the India Bullion and Jewellers Association said that removing curbs on gold imports such as a lower import duty and relaxations in the 80:20 import scheme for jewellers would help lower prices of the yellow metal but concerns over tensions in Russia and Ukraine would continue to weigh on the minds of investors. Mehul Choksi, chairman, Gitanjali Group, said, Gold prices will remain firm around Rs 28,000 per 10 grams due to problems in Ukraine.
On Thursday, gold prices remained flat in Mumbai and closed at Rs 29,865 per 10 gram although globally, gold in New York, which normally sets price trend on the domestic front, fell by 1.5 per cent to $1,288.90 an ounce, the biggest decline since April 15.
Assigning a negative rating to domestic gold prices, India Ratings further said, In any case, any ease in gold import restrictions will have limited incremental impact on domestic gold prices.