"The expected decline in domestic gold prices takes cues from the likelihood of a decline in international gold prices to between USD 1,150-1,250 an ounce during FY15, from the current levels of USD 1,300 an ounce," the ratings agency said, while assigning a negative outlook to domestic gold price for FY15.
Gold prices are ruling at Rs 29,500- Rs 30,000 in major domestic markets at present.
The agency expects a further strengthening in the US and Eurozone GDP growth rates in FY15. This is likely to strengthen the US dollar against other currencies.
The US Dollar Index, which has historically had a negative correlation with gold prices, is expected to remain strong.
It added that the gradual winding-up of unconventional monetary policy (UMP) in the US might cause interest rates to creep up and discourage investments in gold.
Continued risk-on-trade on back of a global economic recovery could generate limited interest in gold ETF (electronic trade fund) investments and could lead to a further unwinding of gold inventory, however, the pace is likely to be moderate.
While the US has initiated the process of winding-up UMP, EU and Japan continue with their loose monetary policy.
Given the unsynchronised monetary policy approach among these major nations and ensuing uncertainty over currencies, central banks remained the net buyers of gold.
However, we expect the net buying to moderately recede in FY15," Ind-Ra said.
Ind-Ra has based its forecast on a substantially lower level of physical premium (importers and traders mark-up) than that prevailed in 2013, due to clarity on gold import policy.
However, this forecast may change if there are lower-than-expected GDP growth rates in the US and EU, geopolitical tensions and China's financial market uncertainty, which could cause gold prices to go up above USD 1,300 levels.