Gold prices are expected to drop to a low of Rs 23,000 per 10 gm on continuing worries over interest rate hike by Federal Reserve and stronger US dollar, analysts say.
“The gold remains bearish and the prices are likely to decline to Rs 23,000-23,500 per 10 grams in a week to month time. This is mainly because the market is nervous of the outcome before July 29, when the US Federal Reserve will take a decision on rate hike. Whatever the decision, it will be negative for gold,” Commtrendz Research Director Gnanasekar Thiagarajan told PTI here.
The gold MCX on Saturday was at Rs 24,752 per 10 grams and USD 1,097.50 in international market.
With the US Federal Reserve hiking the rates looking imminent, the question now is by how much and when, which is keeping the market volatile till a final decision is taken, he added.
In international markets the prices are likely to weaken to USD 1,020 an ounce in a week or month, he said adding, however, it may crack below USD 1,000-level.
Back home, however, the prices of gold will be cushioned if the rupee weakens against the US dollar.
At present, there is demand from stockists, who are gearing up for the coming festivals, even as the retail demand has declined, he said.
Echoing similar views, Angel Broking Associate Director, Commodities and Currencies, Naveen Mathur said the prices are likely to be in the range between Rs 23,500-24,000 by the end of December.
Similarly, the prices in the international market will be around 1,050 an ounce by the end of the year.
“This is mainly due to weak fundamentals like stronger US dollar, decline in investment demand, lack of physical demand. All this is in anticipation of Federal Reserve hiking the rates,” he added.
Moreover, he said, as an asset class gold has lost its status as a safe haven.
According to India Bullion and Jewellers Association (IBJA) president Mohit Khamboj during the last week, gold witnessed a steep fall in the prices to USD 1,085 from USD 1,140 in the international market.
In the domestic market, the prices have fallen from a high of Rs 34,000 per 10 grams to a low of Rs 24,700, losing more than 27 per cent, in a span of nine months.
The prices, he said, may go down further to Rs 23,500 with China offloading the yellow metal from its reserves to withstand the current economic crisis.
“Demand in the domestic market had declined by 10-15 per cent and in the coming festive season, beginning with Raksha Bandhan in August, it may go down by 40 per cent, he added.
However, P N Gadgil Jewellers Chairman and managing Director Saurabh Gadgil said there is lot of demand for raw gold and some people are pre-ordering their orders for wedding jewellery.
“Even if the footfalls are not high, still there is a demand for raw gold and wedding jewellery as people are pre-ordering their orders due to decline in prices.
Also jewellers are stocking up now for the India International Jewellery Show in August and the festival season. I feel the decline in gold price is favourable for jewellers at the moment,” he said.
The prices will definitely go up in a couple of months and the industry is expecting a good Diwali this year, he added.