Gold prices in Indian cities like Mumbai have fallen below the Rs 25,000 mark as the precious metal continues to be hit by a number of factors. Here are 5 reasons why gold prices in India have fallen below the Rs 25,000 mark.
1) Interest rate hike in the US
The US Federal Reserve will be meeting in Sept and it is widely expected that the US would raise interest rates. This is certainly not good news for gold.
2) Poor demand from China
Gold demand from China has not been very encouraging. In fact, the gold reserves of the country stunned investors as they were well below expectations. This further led to selling pressure.
3) Gold ETFs also seeing a decline
Gold ETFs which also track gold prices were seeing a lot of fund flows in the past on account of gold serving as an excellent hedge against inflation. However, Gold ETFs are seeing a lot of redemption which is adding to pressure on prices.
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4) Investors chasing equities
Across the globe there are hardly any geo-political tensions. This has led gold to gradually lose its tag as a safe haven asset. Investors are hence dumping gold in favor equities, which can give far superior returns than gold.
5) Low inflation
Gold is considered as a perfect hedge against inflation. However, inflation across the globe is subdued as commodity prices like crude oil have come crashing down. Even in India where inflation is considered to be very high we are seeing a sharp fall in inflation. This has led investors to move away from gold.
It's difficult to say where gold prices are headed. One thing is clear that it is unlikely to go up in a hurry any time soon. In fact, analysts are now predicting prices would fall below Rs 23,000.