Why gold prices may fall for third year in a row

By: | Updated: December 3, 2015 10:43 AM

In the ongoing calendar year, gold prices in the spot market fell from Rs 26,539 per 10 grams on January 2, 2015 to Rs 25,235 per 10 grams on December 1.

gold pricesIn the ongoing calendar year, gold prices in the spot market fell from Rs 26,539 per 10 grams on January 2, 2015 to Rs 25,235 per 10 grams on December 1. (Photo: Reuters)

It seems another weak calendar year for gold and third in a row as the prices of the yellow metal fell 5 per cent in 2015 till December 2. Gold prices plunged 9.3 per cent and 4.5 per cent in 2014 and 2013, respectively. The metal gained 12 per cent in 2012.

In the ongoing calendar year, gold prices in the spot market fell from Rs 26,539 per 10 grams on January 2, 2015 to Rs 25,235 per 10 grams on December 1. During the year, it touched a high of Rs 28,168 per 10 grams on January 21 and low of Rs 24,562 per 10 grams on August 6.

According to market experts, gold prices are surrounded by a complex set of factors ranging from the uncertainty of rate hike by the US Federal Reserve, low investment and physical demand, ECB decision to losen its monetary programme for growth in the Euro-blo.

DK Aggarwal, chairman and managing director, SMC Investments and Advisors, said, “In days to come, both currency and gold prices may remain influenced by global developments, dollar movement along with major economic data. As of now, the weaker Rupee is supporting bullions prices on local bourses and is expected to support in near term as well. Back at home, in the physical markets, buying interest on back of ongoing marriage season may picked up as gold prices stayed near multi-month lows.”

Outflows from the SPDR Gold Trust for the whole of 2015 also indicates bearish sentiment for the gold. Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, fell 2.41 per cent to 639.02 tonnes on Wednesday, the lowest since September 2008. The outflow is the biggest single-day percentage drop in four years.

In the international markets, gold slumped to a near-six-year low on Thursday after comments from Federal Reserve chair Janet Yellen virtually cemented the case for a US rate hike this month, while the strength in the dollar also pressured the metal. Spot gold fell 0.2 per cent to $1,051.26 an ounce by 0307 GMT.

Prathamesh Mallya, senior research analyst, non agri commodities, Angel Commodities Broking, said, “Strong economic data from the US has raised the probability of rate hike by the US Federal Reserve in its December meeting. While, growth and optimism in the US economy will lead to a stronger dollar and exert downside pressure on commodities including gold. We believe gold prices in the international markets can go lower towards $1,000 mark while MCX gold prices can possibly head lower towards Rs 24,000 mark.”

With agency inputs

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