Retail gold prices in India may dip below the Rs 25,000 mark

Published: Monday, June 9, 2014, 10:09 [IST]

Gold prices are falling and if the trend continues, it may head for a second successive year of losses. In the Mumbai market 24k gold at the retail level was quoting anywhere between Rs 26,500-Rs 26,800 and is roughly the same for other cities in India.

This was as against a rate of Rs 32,800 back in August last year. Analysts are now expecting the prices of gold to fall below the Rs 25,000 mark.

Already there are reports that the government and the Reserve Bank of India (RBI) may begin easing the curbs on gold imports. The RBI late last month allowed star trading houses and premier trading houses to import gold under the 20:80 scheme. This meant a more liberal measure for gold imports.

Now, there are expectations that the government would cut the import duty on gold from 10 per cent to 5 per cent.

The reason for this optimism is that the current account deficit, which had ballooned last year on account of gold imports, has come under control and the government would cut import duties now. Read more on current account deficit here

Should there be a cut to 5 per cent (from 10 to 5 per cent), gold prices would drop by 5 per cent in the domestic market. Another reason for the optimism that gold prices would correct is the fact that the rupee has gained sharply against the dollar and there are hopes that it would continue doing so. Since we import our gold requirements, as the rupee gets stronger against the dollar our landed cost of gold reduces and hence prices at the retail level.

Should the rupee move from levels of Rs 59 upto Rs 55, expect another 8 per cent dip in domestic prices of gold.

However, that is not expected to happen immediately but over a period of time. One would not be surprised if we see gold prices dip below the Rs 25,000 mark, by the end of the year. Check gold rates in your city here

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