According to experts, it is advised to defer gold buying during this festive season, as prices are likely to slide down further. The yellow metal fared better in India in comparison to the international market, mainly on account of weakness in the rupee and high gold import duty. Increased demand during festive season may trigger upward momentum in short-term. But downward momentum in gold may start from November, says experts.
The US Fed is expected to cut back its quantitative easing program sooner or later. This may lead to rise in value of US dollar, which obviously may result in a sharp fall in gold prices. The early indications of recovery in the US economy have led to speculations of interest rate hike to be announced during next Fed meeting. Strength in dollar normally leads to a fall in international gold prices.
The other prominent factor that may determine the near-term prospect of gold prices in India is the curb on imports. If the government decides to introduce relaxations on high import duty or abolish the controversial 80:20 gold import norms, gold prices may plunge further. However, such actions by the government are not expected before the next budget.
Investors around the globe are seen offloading their positions in gold. The net holdings in SPDR Gold Shares - the largest gold based ETF in the world - is presently at the lowest levels since 2008. The holdings have fallen by 43% from its all-time high. Gold purchases by central banks have also declined.
According to jewellers, gold demand continues to remain remained modest in India. The consumer turnout at Mumbai’s busiest Zaveri Bazaar remained low on the initial three-days of the nine-day long Navarathri festival in India.