In the event of a US rate hike, global gold prices could drop between $900 per ounce-$1,050 per ounce
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Mumbai: International gold prices could drop between $900 per ounce to $1,050 per ounce leading to the domestic price of gold to possibly decline in the range of Rs 20,500 per 10gm to Rs 24,000 per 10gm from the current levels.
According to Ind-Ra the movement in gold prices will largely depend on the US Fed’s interest rate decision. In the event of a US rate hike, global gold prices could drop between $900 per ounce-$1,050 per ounce. It however said that the chances of prices falling below $900 per ounce are “remote” till such time as the uncertainty over growth is reduced, as gold is considered a safe haven against economic uncertainty. In the last six years, on an average central banks across the world have been the net buyers of 460 tonnes gold annually with the EU, Russia, China and India being the main buyers.
The agency said that the response of gold inventory owners to various developments will be among the strongest drivers of gold prices in the short term. The price correction of around 30 per cent observed between September 2012 and June 2013 was driven by a 20 per cent sell-off by volume of the gold held for such purposes.
The period coincided with the earliest instances of implicit or explicit forward guidance from US authorities about future interest rate hikes. If the gold price behaviour in September 2012-June 2013 is used as a benchmark, an increase in US rates may cause gold to fall by between 20 per cent –25 per cent.
( Source : deccan chronicle )
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